[Senate Hearing 110-463]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-463
 
                       INDIAN ENERGY DEVELOPMENT

=======================================================================


                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 1, 2008

                               __________

         Printed for the use of the Committee on Indian Affairs




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                      COMMITTEE ON INDIAN AFFAIRS

                BYRON L. DORGAN, North Dakota, Chairman
                 LISA MURKOWSKI, Alaska, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            TOM COBURN, M.D., Oklahoma
DANIEL K. AKAKA, Hawaii              JOHN BARRASSO, Wyoming
TIM JOHNSON, South Dakota            PETE V. DOMENICI, New Mexico
MARIA CANTWELL, Washington           GORDON H. SMITH, Oregon
CLAIRE McCASKILL, Missouri           RICHARD BURR, North Carolina
JON TESTER, Montana
      Allison C. Binney, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 1, 2008......................................     1
Statement of Senator Dorgan......................................     1
Statement of Senator Murkowski...................................     6
Statement of Senator Tester......................................     5

                               Witnesses

Begay, Steven C., General Manager, Dine Power Authority, Navajo 
  Nation.........................................................    21
    Prepared statement...........................................    22
Kitka, Julie, President, Alaska Federation of Natives............    26
    Prepared statement with attachment...........................    29
Middleton, Dr. Robert W., Director, Office of Indian Energy and 
  Economic Development, Office of the Assistant Secretary, Indian 
  Affairs, U.S. Department of the Interior.......................    42
    Prepared statement with attachment...........................    45
Morello, Steven J., Deputy Assistant Secretary, Intergovernmental 
  and External Affairs; Director, Office of Indian Energy Policy 
  and Programs...................................................    67
    Prepared statement...........................................    69
Venne, Hon. Carl, Chairman, Crow Nation..........................    12
    Prepared statement...........................................    14
Wells, Jr., Hon. Marcus D., Chairman, Three Affiliated Tribes of 
  the Fort Berthold Indian Reservation...........................     7
    Prepared statement...........................................    10

                                Appendix

Brown, Elouise, President, Dooda Desert Rock Organization, 
  prepared statement.............................................    82
Cesspooch, Hon. Curtis R., Chairman, Ute Tribe of the Uintah and 
  Ouray Reservation, prepared statement..........................    79
Foster, Neal W., Board Member/Vice-President, Sitnasuak Native 
  Corporation, prepared statement................................    81
Marchand, Hon. Michael E., Chairman, Confederated Tribes of the 
  Colville Reservation, prepared statement.......................    89
Martin, Karmelita Plains Bull, prepared statement................    91
Response to written questions submitted to Steven J. Morello by:
    Hon. Maria Cantwell..........................................   104
    Hon. Byron L. Dorgan.........................................    92
Written questions submitted by Hon. Byron L. Dorgan to Dr. Robert 
  W. Middleton...................................................   106


                       INDIAN ENERGY DEVELOPMENT

                              ----------                              


                         THURSDAY, MAY 1, 2008


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:30 a.m. in room 
562, Dirksen Senate Building, Hon. Byron L. Dorgan, Chairman of 
the Committee, presiding.

          OPENING STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    The Chairman. We will call the hearing to order. Good 
morning to all of you. This is a hearing of the Indian Affairs 
Committee of the United States Senate. The hearing is on the 
subject of energy development.
    The Committee will conduct an oversight hearing today on 
Indian energy development. Today's hearing is in part the 
result of a hearing the Committee held a little more than five 
years ago. In March of 2003, we held a hearing on two bills 
that eventually became the Indian Tribal Energy Development and 
Self-Determination Act. This Act was passed by the Congress as 
Title V of the Energy Policy Act in the year 2005.
    Today's hearing will examine the level to which that law 
has been implemented. This hearing will also examine the past 
and the present barriers that limit potential development of 
tribal energy resources. We will also evaluate the ability of 
tribes to fully participate in the energy industry and in 
energy markets.
    The Committee has noticed an important shift in energy 
development on Indian reservations. Many Indian tribes are no 
longer satisfied with Federal leasing programs that promote 
passive involvement of tribes in developing their energy 
resources. Instead, tribal governments are interested in 
acquiring the tools needed to actively participate in the 
energy industry and in energy markets. This is important, 
because it is a shift taking hold at the Federal and tribal 
levels, and in some cases it's a route that the tribes have 
been on for many, many decades.
    To get a sense of the energy potential on Indian lands, we 
have borrowed some maps from our friends at the Department of 
Interior and the Department of Energy. I am going to put up 
chart one. This is a map of oil, gas and coal energy potential 
on Indian lands. Reservations are highlighted in yellow on this 
map and have a high production potential. Reservations 
highlighted in orange have moderate potential. As you can see, 
many of the tribes in the west have mineral resources with very 
high production potential.



    Chart two, second map, is a map of renewable and wind 
resource potential. On this map, all of the areas in pink and 
purple and red are good for wind generation. There is a massive 
renewable wind potential on reservations in North and South 
Dakota. This map shows you what the Department of Energy says 
about my home State, North Dakota. It says it is the Saudi 
Arabia of wind. Those of us who have grown up there and learned 
to lean toward the northwest most of our life understand what 
that means.


    The third chart is a map of renewable solar resource 
potential. On this map, the light green area covering the 
southwestern United States shows the greatest solar potential. 
You will see the light green down in the southwest. And the 
darker green area, which includes many more reservations, is 
also considered suitable for solar power development. I 
recently toured down in Arizona a solar power production area. 
They are in the process of putting in place, I believe it was a 
180, maybe 280 megawatt solar application. It is very exciting. 
Solar energy is something with great potential and our Country, 
regrettably, has fallen behind in those areas.



    All of these maps show the untapped potential for energy 
and renewable development, especially on Indian reservations. 
The hard part is overcoming the history of energy development 
on Indian reservations, I say, the neglectful history. For most 
of this past century, Indian energy development has meant 
mineral leasing, leases where tribal and individual Indian 
owners of the minerals were not provided full opportunities to 
negotiate in their best interest. Instead, the Federal 
Government managed these leases through a bureaucracy that 
often lacked the staff and resources to effectively manage 
their workload.
    Recent laws, Title V of the Energy Act in particular, have 
begun to recognize the authority of tribal governments to 
negotiate their own leases. These laws also recognize that 
tribes may be interested in more than just mineral leasing and 
may enter into a variety of energy agreements or joint 
ventures. But again, a century of shifting Federal policies has 
injected so much uncertainty into reservation land and resource 
status it is difficult for tribes to get to the negotiating 
table to be full partners.
    Other barriers also remain. Uncertainties in existing law 
discourage potential investors from financing, in some cases, 
reservation projects. Tribes are currently not able to raise 
bond revenue or receive tax benefits as a result of State and 
municipal government activities that do receive these benefits. 
Despite the fact that reservation residents look to tribal 
governments to provide their local services, tribal governments 
ought to have the same opportunity as municipal and local 
governments do with respect to bonding.
    In addition, there are some disincentives to energy 
development on Indian lands, because certain activities are 
subject to dual taxation. In my view, we have only just begun. 
With the experience of the tribes and the tools of the 
departments, I hope we can break down the remaining barriers 
that now limit the potential of Indian energy development. 
Unlocking this potential, I believe, will help tribes provide 
for their communities and will serve our national interest in 
becoming more energy independent. The opportunities are so 
great and the benefits so needed that providing tribes the 
tools they need should be among our top priorities.
    We are now joined in a grand entrance by my colleague from 
Montana, Senator Tester. Senator Tester, I just showed several 
maps that show the very substantial energy potential that 
exists on Indian reservations, particularly in the northern 
Great Plains, Montana, North Dakota and South Dakota, and some 
other parts of the Country as well. I have just described in an 
opening statement some of the barriers we are going to hear 
about today.
    Let me call on you, and I appreciate your being here.

                 STATEMENT OF HON. JON TESTER, 
                   U.S. SENATOR FROM MONTANA

    Senator Tester. Thank you, Mr. Chairman. I appreciate your 
holding this hearing.
    I also appreciate Chairman Carl Venne from the Crow coming 
down to give us his perspective. Carl is somebody I met a 
number of years back and somebody I have a tremendous amount of 
respect for and a tremendous amount of respect for his vision, 
quite honestly. So thanks for being here, Carl.
    I guess the bottom line is, and just coming in, I will just 
tell you what is on the top of my head. The truth is, I think 
we need to empower Indian Country to be able to become self-
sufficient. And one of the ways they can become self-sufficient 
is through development of the resources. They have incredible 
opportunity, whether it is traditional resource development 
like oil and gas and coal or whether it is development of 
renewable resources and geothermal resources and those kinds of 
renewable resources that are out there that are available to 
many areas and many of the lands that Indian Country rests 
upon. I look forward to hearing from each and every one of you 
on the panel about your challenges, what you see are the major 
road blocks to be able to develop your natural resources in a 
way that makes sense for your people.
    Thank you very much, Mr. Chairman.
    The Chairman. Senator Tester, thank you very much.
    We are joined by the Vice Chair, Senator Murkowski.

               STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Good morning, Mr. Chairman, and to 
members of the panel, good morning. A special welcome, of 
course, to my constituent and friend, Julie Kitka, representing 
the Alaska Federation of Natives.
    Mr. Chairman, I want to thank you for holding this very 
important hearing. We are certainly talking about energy all 
over the Hill today. That reflects the conversations all over 
the Country. People are talking about what is going on with 
energy and the current environment, the very, very high oil 
prices, bring real challenges, daunting challenges, both to our 
urban and rural communities. I think it truly highlights more 
than ever the importance of developing our domestic sources of 
supply. We certainly up north believe that we have enormous 
potential in ANWR and parts of my State. Great potential, great 
opportunity for our tribes both in Alaska and in the lower 48, 
opportunity to continue to contribute to domestic supply and 
for bringing economic development to the communities.
    I am particularly interested in hearing whether Indian 
tribes and Native villages have the tools that they need to tap 
into this enormous potential and whether we here in the Federal 
Government are doing all that we can to assist in using the 
tools that we have provided in the past.
    We all talk about what is happening back home and the 
impact to our communities. In Alaska I think it is particularly 
stark in terms of the realities that our villages are facing. A 
few communities are particularly noteworthy in terms of what 
they are facing with their costs, but more importantly how they 
are partnering to deal with the challenges. We have a few 
communities that have already taken a lead. The Alaska Village 
Electric Co-Op, which provides electricity to 53 rural 
communities, is a good example. They partner with the 
Department of Energy and they have installed wind turbines that 
are specifically designed for Arctic climates. They have 
installed these wind turbines in Intuksek Bay and Kasegaluk. 
And these turbines are supplying 25 percent of the electricity 
needs that we have for these communities.
    This spring, AVEC won the 2007 wind cooperative of the year 
ward from the U.S. DOE's Wind Powering America program in 
recognition of its leadership and its success. There are also 
other examples of future projects in Alaska. Cook Inlet Native 
Corporation is proposing to install a 60 to 100 megawatt wind 
farm on the land that it owns just off of Anchorage there in 
Fire Island. St. Paul Island Village Corporation formed an 
electric power company that is seriously proposing to install a 
300 megawatt hydroelectric development on Chakachownut Lake 
near Anchorage. We have a host of other tribes that have 
expressed interest in biomass and in geothermal besides the 
wind projects, the ocean energy projects. But we know that many 
of these projects could very seriously benefit from the seed 
money that Congress thought it was providing, the loan 
guarantees that we thought we had approved through the Energy 
Policy Act.
    We recognize that we need to do more to help facilitate the 
development on our Indian lands. We would certainly like to 
know that under Title V, this new Title V, that we are 
progressing and advancing tribes in a way that will allow them 
to develop their energy potential. So I look forward to 
comments from the witnesses and panelists here this morning, 
Mr. Chairman. Thank you.
    The Chairman. Senator Murkowski, thank you very much.
    I am pleased that the Honorable Marcus Wells., Jr., the 
Chairman of the Three Affiliated Tribes in North Dakota, has 
joined us. I should say to my two colleagues that the Three 
Affiliated Tribes is right smack in the middle of the most 
substantial oil play in the United States at the moment. The 
assessment by the U.S. Geological Survey (USGS) in the last two 
weeks that I announced with them shows that the Bakken Shale, 
which includes Montana and North Dakota and a portion of 
Canada, has the largest assessed recoverable pool of oil that 
the USGS has ever assessed in the lower 48 States. So Chairman 
Wells is the tribal chairman of a tribe that is very, very 
interested in, not for academic purposes, but very interested 
in this issue because they are in the middle of a very 
substantial amount of additional oil development.
    Chairman Wells, thank you for coming to Washington to 
testify. And you may proceed. I would say to all four witnesses 
that your entire statements will be made a part of the 
permanent record and we would ask that you summarize.

    STATEMENT OF HON. MARCUS D. WELLS, JR., CHAIRMAN, THREE 
            AFFILIATED TRIBES OF THE FORT BERTHOLD 
                       INDIAN RESERVATION

    Mr. Wells. Thank you, Chairman Dorgan. My name is Marcus 
Dominick Wells, Jr., Eh-Bah-Dah-Gish, Bald Eagle. I am the 
elected chairman of the Three Affiliated Tribes of the Fort 
Berthold Indian Reservation.
    I would like to thank the Chairman and the members of the 
Committee for the opportunity to provide testimony on behalf of 
the tribal business council of the Three Affiliated Tribes, the 
Mandan, Hidatsa and Arikara. The Three Affiliated Tribes have 
been poised at the brink of what could be the largest period of 
economic development in the history of the tribe. The surge in 
oil and gas exploration in the Bakken Formation has brought the 
promise of significant prosperity to the Fort Berthold Indian 
Reservation.
    However, even as some of our tribal members are beginning 
to enjoy significant lease bonus payments, many of whom have 
lived in poverty their entire lives, the Tribe and the Fort 
Berthold mineral owners have been negatively impacted by the 
current delivery of trust responsibility by the Fort Berthold 
Agency and the Aberdeen Area Office of the Bureau of Indian 
Affairs. Specifically in areas administering the exploration 
and development of oil and gas within the exterior boundaries 
of the Fort Berthold Indian Reservation.
    The tribal business council negotiated three IMDAs, or 
modified oil and gas leases with Black Rock LLC, JT Energy LLC 
and Dakota 3 LLC, that were presented for approval to the 
Bureau of Indian Affairs in calendar years 2005, 2006 and 2007 
respectively. Collectively, the IMDAs took over three years to 
receive formal secretarial approval, with the last IMDA 
receiving its final approval in February of this year.
    The mineral owners of the Three Affiliated Tribes have also 
undergone the leasing process through either private 
negotiation or in two formal oil and gas bid sales held by the 
Fort Berthold Agency in December 2006 and November 2007. 
However, an unacceptable number of those leases still remain to 
be unapproved and/or processed for payment of lease bonuses and 
to be moved forward to complete the applications for permits to 
drill.
    The delays in lease approval and other bureaucratic hurdles 
have not only caused untold harm on the tribe and the Fort 
Berthold mineral owners but have utterly frustrated the oil and 
gas industry as to the prospect of actual oil and gas 
exploration on the Fort Berthold Indian Reservation. 
Representatives of the oil and gas industry have visited and 
formally met with the tribal business council to express those 
frustrations and to request our help in moving the Fort 
Berthold and the entire BIA forward on completing their duties 
to the Three Affiliated Tribes and our respective membership.
    The Three Affiliated Tribes have held our own oil and gas 
industry meetings and listening sessions during the months of 
April, July, September, November and December of 2007, January, 
February and March of 2008. The purpose of those meetings was 
to reassure the oil and gas companies that the Three Affiliated 
Tribes were doing everything within our power to support the 
formal approval of their respective oil and gas leases. This 
was done for the benefit of the entire enrolled membership of 
the Three Affiliated Tribes of the Fort Berthold Indian 
Reservation that happens to be situated on the Bakken Shale 
Formation of western North Dakota.
    At the heart of this sudden oil boom is the Bakken 
Formation, an oil shale formation located within the Williston 
Basin. The Bakken Formation was the subject of an April 2008 
USGS reported that stated, ``Using a geology-based assessment 
methodology, the U.S. Geological Survey estimated mean 
undiscovered volumes of 3.65 billion barrels of oil, 1.85 
trillion cubic feet of associated/dissolved natural gas, and 
148 million barrels of natural gas liquids in the Bakken 
Formation of the Williston Basin Province, Montana and North 
Dakota.''
    The entire Fort Berthold Reservation lies within the Bakken 
Formation. While to the north, west and south of the 
Reservation has seen significant development, the BIA failures 
have left the Tribe, the Fort Berthold mineral owners and our 
entire membership looking out and wondering if we will ever see 
that type of activity.
    While the Three Affiliated Tribes may be unable to stir any 
successful response from the Fort Berthold Agency and the Great 
Plains Region, we have begun to do what we can to encourage and 
support oil and gas exploration within the exterior boundaries 
of the Reservation. The tribe and North Dakota Governor John 
Hoeven's office have been actively negotiating a tribal-State 
oil and gas tax agreement. While a tax agreement provides the 
oil and gas industry with some certainty as to taxes, the 
Tribe's share of any oil and gas taxes collected will provide a 
significant source of tax revenue to address Federal funding 
shortfalls related to our 638 contracts for health care and law 
enforcement on the reservation.
    Also the surge in oil activity in and around the 
Reservation has created millions of dollars of damage to our 
already-insufficient road system. A system of BIA-constructed 
roads that were not meant to sustain such heavy traffic or 
weight loads that were already in disrepair before the influx 
of hundreds of oil and gas trucks and tankers. Therefore, I and 
the tribal business council have specifically dedicated a 
significant amount of the anticipated oil and gas tax revenues 
for the specific tribal needs of health care, law enforcement 
and roads. We are extremely hopeful that the negotiations with 
Governor Hoeven will conclude with an amicable and respectful 
agreement that can benefit the Three Affiliated Tribes and all 
of North Dakota.
    The Three Affiliated Tribes is also expanding our reach 
into energy development through our proposed Clean Fuels Oil 
Refinery Project. The U.S. EPA Region 8, in close coordination 
with the Tribe and the BIA, have recently completed the draft 
Environmental Impact Statement, EIS, and we are in the process 
of placing it in the Federal Register. However, after two years 
of planning and work, additional administrative hurdles were 
presented to when the Department of Interior's Solicitor's 
office has now stated that it will begin its own formal review 
of the draft EIS. The entire EIS project was done under the co-
lead of EPA and BIA. We are confident that this draft EIS will 
withstand all legal challenges. That is why we are hopeful that 
our Clean Fuels Refinery Project will not suffer the 
administrative and bureaucratic delays that have thus far 
stymied oil and gas development on the Fort Berthold 
Reservation.
    The Three Affiliated Tribes is also exploring other 
activities to develop our energy resources more effectively. 
The Tribe is reviewing the possibilities of a Tribal Energy 
Development Agreement, or TERA, to take over the duties of 
approving tribal leases and right-of-ways; the future 
development of large scale renewable energy projects such as 
wind farms; and the development of tribal-owned and managed 
energy infrastructure to support oil and gas development, both 
on and off the reservation.
    In closing, what is most apparent from the recent 
developments on the Fort Berthold Indian Reservation is that 
our success or failure in the development of our minerals 
resources lies almost entirely in the hands of the Bureau of 
Indian Affairs. The utter failure of the BIA to meet a basic 
duty of its trust responsibility and adequately administer the 
processing of oil and gas leases, including payments to mineral 
owners, and to complete its administrative responsibilities in 
the approving of drilling permits leaves the Three Affiliated 
Tribes, the Fort Berthold mineral owners and our entire 
enrolled membership asking why is this happening to us and why 
is it being allowed to continue.
    Due to the significant mistakes, errors in judgment and 
lack of trained staff by the BIA, the Fort Berthold Reservation 
may very well miss out on the economic boom that the rest of 
North Dakota appears to be enjoying. I am hopeful that with my 
testimony today and with significant assistance from this 
Committee, the Three Affiliated Tribes may be finally given the 
opportunity to fully develop our oil and gas resources for the 
benefit of the Tribe, our enrolled members and all of North 
Dakota.
    Modzigidaz. Thank you.
    [The prepared statement of Mr. Wells follows:]

Prepared Statement of Marcus D. Wells, Jr., Chairman, Three Affiliated 
                Tribes of the Fort Berthold Reservation
    My Name is Marcus Dominick Wells, Jr., Eh-Bah-Dah-Gish, (Bald 
Eagle) I am the elected Tribal Chairman of the Three Affiliated Tribes 
of the Fort Berthold Indian Reservation. I would like to thank Chairman 
Dorgan and the Members of this Committee for the opportunity to provide 
testimony on behalf of the Tribal Business Council of the Three 
Affiliated Tribes; the Mandan, Hidatsa and the Arikara.
    The Three Affiliated Tribes has been poised at the brink of what 
could be the largest period of economic development in the history of 
the Tribe. The surge in oil and gas exploration in the Bakken Formation 
has brought the promise of significant prosperity to the Fort Berthold 
Indian Reservation However, even as some of our Tribal members are 
beginning to enjoy significant lease bonus payments, many of who have 
lived in poverty their entire lives, the Tribe and the Fort Berthold 
mineral owners have been negatively impacted by the current delivery of 
trust responsibility by Fort Berthold Agency and the Aberdeen Area 
Office of the Bureau of Indian Affairs; specifically in the areas of 
administering the exploration and development of oil and gas within the 
exterior boundaries of the Fort Berthold Indian Reservation.
    The Tribal Business Council negotiated three (3) IMDA's or Modified 
Oil and Gas Leases with Black Rock, LLC, JT Energy and Dakota 3, LLC 
that were presented for approval to the Bureau of Indian Affairs in 
Calendar Years 2005, 2006 and 2007 respectively. Collectively, the 
IMDAs took over three years to receive formal Secretarial approval, 
with the last IMDA receiving its final approval in February of this 
year.
    The Mineral Owners of the Three Affiliated Tribes have also 
undergone the leasing process, through either private negotiation or in 
two formal Oil and Gas Bid Sales held by the Fort Berthold Agency in 
December 2006 and November 2007. However, an unacceptable number of 
those leases still remain to be approved and/or processed for payment 
of lease bonuses and to be moved forward to complete the Applications 
for Permits to Drill (APDs). The delays in lease approval and other 
bureaucratic hurdles have not only caused untold harm on the Tribe and 
the Fort Berthold Mineral Owners but have utterly frustrated the Oil 
and Gas Industry as to the prospect of actual oil and gas exploration 
on the Fort Berthold Reservation. Representatives of the Oil and Gas 
Industry has visited and formally met with the Tribal Business Council 
to express those frustrations and to request our help in moving the 
Fort Berthold Agency and the entire BIA forward on completing their 
duties to the Three Affiliated Tribes and our respective membership.
    The Three Affiliated Tribes have held our own Oil and Gas Industry 
meetings and listening sessions during the months of April 2007, July 
2007, September 2007, November 2007, December 2007, January 2008, 
February 2008 and March 2008. The purpose of those meetings was to 
reassure the Oil and Gas Companies that the Three Affiliated Tribes 
were doing everything within our power to support the formal approval 
of their respective oil and gas leases. This was done for the benefit 
of the entire enrolled membership of the Three Affiliated Tribes of the 
Fort Berthold Indian Reservation that happens to be situated on the 
Bakken Shale Formation of Western North Dakota.
    At heart of this sudden oil boom is the Bakken Formation, an oil 
shale formation located with the Williston Basin. The Bakken Formation 
was the subject of a April 2008 USGS report that stated, ``Using a 
geology-based assessment methodology, the U.S. Geological Survey 
estimated mean undiscovered volumes of 3.65 billion barrels of oil, 
1.85 trillion cubic feet of associated/dissolved natural gas, and 148 
million barrels of natural gas liquids in the Bakken Formation of the 
Williston Basin Province, Montana and North Dakota.'' The entire Fort 
Berthold Reservation lies within the Bakken Formation. While to the 
north, west and south of the Reservation has seen significant 
development, the BIA failures have left the Tribe, the Fort Berthold 
Mineral Owners and our entire membership looking out and wondering if 
we will ever see that type of activity.
    While the Three Affiliated Tribes may be unable to stir any 
successful response from the Fort Berthold Agency and the Great Plains 
Region, we have begun to do what we can to encourage and support Oil 
and Gas exploration within the exterior boundaries of the Fort Berthold 
Reservation. The Tribe and North Dakota Governor John Hoeven's Office 
have been actively negotiating a tribal state oil and gas tax 
agreement. While a tax agreement provides the oil and gas industry with 
some certainty as to tax rates, the Tribe's share of any oil and gas 
taxes collected will provide a significant source of tax revenue to 
address federal funding shortfalls related to our 638 contracts for 
healthcare and law enforcement on the Reservation. Also, the surge in 
oil activity in and around the Reservation has also created millions of 
dollars of damage to our already insufficient road system, a system of 
BIA constructed roads that were not meant to sustain such heavy traffic 
or weight loads and that were already in disrepair before the influx of 
hundreds of oil and gas trucks and tankers. Therefore, I and the Tribal 
Business Council have specifically dedicated a significant amount of 
the anticipated oil and gas tax revenues for the specific tribal needs 
of healthcare, law enforcement and roads. We are extremely hopeful that 
the negotiations with Governor Hoeven will conclude with an amicable 
and respectful agreement that can benefit the Three Affiliated Tribes 
and all of North Dakota.
    The Three Affiliated Tribes is also expanding our reach into the 
energy development though our proposed Clean Fuels Oil Refinery 
Project. The U.S. EPA--Region 8, in close coordination with the Tribe 
and BIA, have recently completed the draft Environmental Impact 
Statement (EIS) and were in the process of placing it in the Federal 
Register. However, after over two years of planning and work, 
additional administrative hurdles were presented to us when the 
Department of the Interior Solicitor's Office has now stated that it 
will begin its own formal review of the draft EIS. This entire EIS 
project was done under the co-lead of EPA and BIA and we are confident 
that this draft EIS will withstand any legal challenge. That is why we 
are hopeful that our Clean Fuels Refinery Project will not suffer the 
administrative and bureaucratic delays that have thus far stymied oil 
and gas development on the Fort Berthold Reservation.
    The Three Affiliated Tribes is also exploring other activities to 
develop our energy resources more effectively. The Tribe is reviewing 
the possibilities of a Tribal Energy Development Agreement or TERA to 
take over the duties of approving tribal leases and right-of-ways; the 
future development of large scale renewable energy projects such as 
wind farms; and the development of tribal owned and managed energy 
infrastructure to support oil and gas development both on and off 
reservation.
    In closing, what is most apparent from the recent developments on 
the Fort Berthold Indian Reservation is that our success or failure in 
the development of our mineral resources lies almost completely in the 
hands of the Bureau of Indian Affairs. The utter failure of the BIA to 
meet a basic duty of its trust responsibility to adequately administer 
the processing of oil and gas leases including payments owed to mineral 
owners and to complete its administrative responsibilities in the 
approving of drilling permits leaves the Three Affiliated Tribes, the 
Fort Berthold Mineral Owners and our entire enrolled membership asking 
why is this happening to us and why is it being allowed to continue. 
Due to the significant mistakes, errors in judgment and lack of trained 
staff by the BIA, the Fort Berthold Reservation may very well miss out 
on the economic boom that the rest of the North Dakota appears to be 
enjoying. I am hopeful that with my testimony today and with 
significant assistance from this Committee, the Three Affiliated Tribes 
may be finally given the opportunity to fully develop our oil and gas 
resources for the benefit of the Tribe, our enrolled members and all of 
North Dakota. ``Mod-zi-gidaz''. Thank you.

    The Chairman. Chairman Wells, thank you very much.
    I must observe that this Committee has been involved in 
pushing the BIA. We have had discussions with Carl Artman on 
those issues and he has indicated to us he is pushing very 
hard. Now we read in the newspapers and hear that the Assistant 
Secretary for Indian Affairs, Mr. Artman, has resigned, which 
is terrible news, in my judgment. The position was vacant for 
two years, now it has been filled for one year, now it is going 
to be vacant again. The BIA is not a well-run organization in 
any event. I had high hopes that Mr. Artman would come in and 
be very helpful. He has been helpful for us to work with. This 
is a huge disappointment.
    I understand the point you are making, Chairman Wells. We 
have to get this right. And I will ask some questions about it. 
First, let's go to the other witnesses. Chairman Venne, thank 
you for being with us and thank you for being a gracious host 
to me when I visited your reservation with Senator Tester last 
year. You may proceed.

      STATEMENT OF HON. CARL VENNE, CHAIRMAN, CROW NATION

    Mr. Venne. Good morning. On behalf of the Crow Nation, I 
want to thank you, Chairman Dorgan, and the Committee members 
of the Senate Committee on Indian Affairs, for holding an 
oversight hearing on energy development.
    My name is Carl Venne. I am Chairman of the Crow Tribe and 
also Chairman of the largest land-based tribe here in America.
    I usually don't like to read, so I am just going to tell 
you from my heart what I think. My Tribe has an unemployment 
rate of 47 percent. If you look at the last census, we are the 
fourth poorest county in this whole Nation. Our population is 
about 12,000 Crow Indians, about 8,000 live on the reservation. 
But we do have vast resources, especially in coal, we estimate 
anywhere from 10 billion to 19 billion tons of coal.
    We realize what this great Nation faces as energy is 
becoming scarce. But this Committee should know that 20 percent 
of all energy in the United States is owned by Indians. But we 
as Indians are willing to help and work with the United States, 
to be a partner with the United States. I no longer just want 
to do a lease under the 1938 Minerals and Mining Act. I want to 
own the companies. How do I do that?
    I want to have a coal mine. I want to have a coal-to-
liquids project which can produce 250,000 barrels a day for the 
next 120 years. That is how much coal I have. How do I get to 
that?
    We talk about sequestration. We have, and I have been 
working with the University of Montana to address that problem. 
But if you are talking about oil recovery, especially in the 
northeastern part of Montana and North Dakota, the carbon 
dioxide that we produce could be piped up there to enhance 
development of the oil recoveries, also. We are also looking 
into that. It is very important that you realize that as this 
Nation goes along, and I have been looking at what is happening 
with the U.S. Air Force, they are trying to put coal-to-liquid 
to fly their bombers and stuff. We have looked into that.
    But I need assistance. With the coal and the projections we 
are doing today, I could provide a third of the Air Force's 
energy or fuel every year. That would be a tremendous help to 
our military in securing our Nation. That is very important to 
me and I hope it is important to everybody in this room.
    That is what we are looking at. How do I, as one of the 
poorest counties in this whole Nation, become self-sufficient? 
By energy development. I want to own the companies. I don't 
want a simple lease.
    If you look at Interior's Energy Department and Economic 
Development Department, they have been a tremendous help. 
Before I didn't know the quality and quantity of all our 
resources on the reservation. Now I know. Now I can plan to 
move forward. But without the Government helping me, or even 
the State of Montana, I would be unable to do this.
    The figures I have been getting, and our annual income is 
only $6,000 to $7,000 a year. But getting into these 
developments, I have a budget of about $22 million, from $22 
million to $2.7 billion a year, that would secure my Tribe. I 
wouldn't need Federal assistance. I wouldn't need State 
assistance. You need to give me this opportunity. It is very 
important to my Tribe.
    This would carry generations to generations to generations 
by good investment with your monies, not paying per capitas, by 
creating good jobs, high-paying jobs. When a college person 
graduates, if we get into this development, they will be 
starting at $50,000, $60,000, $70,000 a year jobs, which is 
good for all of us. I like to brag about how many college 
students we have. We have over 400 college students this year. 
But it is hard to fund them. How do we fund them? I will tell 
you how I fund them. Using tax money from the State of Montana, 
the tobacco tax and the gas tax, putting $2 million into 
education to help our young people.
    But it is very hard. I need your support to work with me. 
How do I talk to the Department of Defense, or to the Energy 
Committee within the Senate? We are willing to do that as 
Indian tribes. If you look at the war today, 70 percent of all 
our young men and women enlist and go to war for this Nation. 
Look at what we gave up as tribes, the land base. I used to own 
all of Powder River Basin, you are talking billions of dollars 
that have gone by. But it is time we get together. It is time, 
there are problems in leasing. I will give you an example. We 
gave some oil leases out in 2005, I finally get approval in 
2007 from Interior. That kind of stuff, it takes too long to 
make a business decision in Indian Country.
    Also, BLM is charging $4,000 to punch one hole on an Indian 
reservation. When you go off the reservation, it costs $100 and 
it is approved within three days. That is the kind of help I 
need. It is very important for tribes to progress and get into 
the fast lane. We want to deal directly with industry and 
Government ourselves. I don't need somebody looking over my 
shoulder and saying, well, you have to do this, this and this. 
Give us a chance to make our own mistakes in what we decide as 
tribes. We have young, educated people within the tribes that 
we would be utilizing. We do have people with masters, 
doctorates. It is time to take a look at yourself as the Bureau 
of Indian Affairs, look at your staff. I will compare my staff 
to the agency staff any day on being educated on what we want.
    We know where we want to go. Why can't I provide a third of 
the energy to the U.S. Air Force today?
    Thank you.
    [The prepared statement of Mr. Venne follows:]

      Prepared Statement of Hon. Carl Venne, Chairman, Crow Nation
I. Introduction
    Good morning. On behalf of the Crow Nation, I want to thank 
Chairman Dorgan and the members of the Senate Committee on Indian 
Affairs for holding this Oversight Hearing on Indian Energy 
Development. My name is Carl Venne and I am the Chairman of the Crow 
Nation. I appreciate this invitation to provide testimony from the Crow 
Nation's perspective on energy development, an area central to my 
administration and a topic that has unlimited potential to improve the 
ongoing substandard socioeconomic conditions of the Crow people and the 
surrounding communities in southeastern Montana.
    During my administration over the past six years, with the help of 
many partners and allies, we have taken several meaningful steps toward 
the successful development of our energy resources and look forward to 
completing, in the next few years, projects that will transform my 
community. My purpose today is to provide a brief history of these 
efforts and to share some of our understanding of what further work is 
necessary for tribal energy development.
II. Brief Overview of Crow Reservation and Resources
A. Brief History of Land and Population
    The Crow Nation is a sovereign government located in southeastern 
Montana. The Crow Nation has three formal treaties with the federal 
government, concluding with the Fort Laramie Treaty of May 7, 1868. The 
Crow Reservation originally encompassed most of Wyoming (including the 
Powder River Basin) and southeastern Montana. Through a series of 
treaties, agreements and unilateral federal laws over a 70 year span, 
Crow territory was reduced by 92 percent to its current 2.2 million 
acre area.
    In addition to substantial land loss, the remaining tribal land 
base within the exterior boundary of the Crow Reservation was carved up 
by the 1920 Crow Allotment Act. In 1919, prior to the Allotment Act, 
there were already 2,453 allotments, consisting of 482,584 acres. By 
1935, there were 5,507 allotments, consisting of 2,054,055 acres 
(218,136 acres were alienated by 1935). The Big Horn and Pryor 
Mountains were not allotted and still remain reserved for the Crow 
Nation and its citizens.
    A unique provision of the 1920 Act, Section 2, remains a serious 
problem. According to this provision, the Secretary of the Interior was 
not to approve a conveyance of land to a person, company or corporation 
who already owned at least 640 acres of agricultural or 1,280 acres of 
grazing land within the Crow Reservation. Further, the Secretary of the 
Interior was not to approve a conveyance of land to a person, company 
or corporation that, with the conveyance, would own more than 1,280 
acres of agricultural or 1,920 acres of grazing land. A conveyance of 
Crow land exceeding these restrictions was considered void and the 
grantee was guilty of a misdemeanor, punishable by a $5,000 fine and/or 
6 months in jail. Federal enforcement of this statute has been non-
existent, and today, approximately one third of the acreage of the 
Reservation is owned in violation of the 1920 Allotment Act.
    At the same time as the Crow land base was being unilaterally 
reduced, the number of Crow citizens also dwindled dramatically. In 
fact, according to the Annual Reports of the Commission of Indian 
Affairs, the Crow population decreased by 50 percent in 30 years. In 
1880, the U.S. Census estimated the Crow population to be approximately 
3,400 and in 1910, that number was about 1,700. A number of factors 
caused the rapid population decline: tuberculosis; poor sanitation; 
crowded living conditions; severe weather; and epidemics of other 
infectious diseases. At that time, others arguing for more complete 
``opening'' of the Crow Reservation argued that the statistics showed 
that within a few years the Tribe would be eradicated and would have no 
more need for its lands. Perhaps you can imagine the effects of such 
rhetoric on people struggling to survive.
B. Present Land and Population
    As recognized by the U.S. Supreme Court in Montana v. U.S., 450 
U.S. 544, 548 (1981), the statistical land ownership resulting from the 
above described legal history was: 52 percent Crow allotments; 17 
percent Crow Nation trust land; 28 percent non-Indian fee land; 2 
percent State of Montana fee land; and 1 percent federal government 
land. According to more recent Bureau of Land Management Reports, the 
land statistics have shifted: 45 percent Crow allotments; 20 percent 
Crow Nation trust land; and 35 percent non-Indian fee land. In sum, the 
pattern of surface ownership generally is ``checkerboard'' with 
interspersed Crow Nation trust and fee lands, Crow allotments and non-
Indian fee lands. The statistics show limited success of the Crow 
Nation in reacquiring lost lands, but the reality is a much larger 
pattern of continued loss.
    Today, there are about 12,000 enrolled citizens of the Crow Nation, 
with approximately 8,000 of those residing within the exterior 
boundaries of the Reservation. Our goal is to invite more of our 
citizens to return home to live and resume tribal relations, but we 
must be able to offer them homes, jobs, and a place to find their 
dreams. Our current unemployment rate is 47 percent. The Crow Nation 
has always emphasized higher education and we currently have more than 
400 annual applications for higher education assistance. Because of 
federal funding limitations and internal budget constraints, however, 
we can only fund 90 students each year.
    In addition to providing financial support for education, we have a 
separately chartered tribal college (Little Bighorn College, ``LBHC'') 
that started operations in 1981. LBHC has had over 300 graduates. LBHC 
graduates are employed on and around the Crow Reservation in a variety 
of positions including teachers' aids, computer technicians, office 
managers and administrative assistants. At least sixty have completed 
bachelor's degrees and are pursuing professions in education, social 
work, human services, science, nursing, technology, accounting and 
business. As we move forward in developing our energy resources, our 
own college can help to provide our citizens with training in new 
fields for new job opportunities.
C. Minerals, Past and Present
    The Crow Nation has an opportunity to develop tribal resources 
because a minority of important legislation allowed for the protection 
of significant amounts of mineral rights by the Tribe. The 1920 Crow 
Allotment Act reserved all minerals, oil and gas on any allotted lands 
for the benefit of the entire tribe. However, after 50 years, unless 
otherwise ordered by Congress, the minerals would automatically become 
the property of the Crow allottee (or heir). In addition, the Allotment 
Act also stated that any mining leases could not exceed 10 years; but 
the lessee had a first right of renewal.
    In 1968, Congress extended the time period in perpetuity for the 
minerals to be held and reserved for the Crow Nation. Today, the Crow 
Reservation contains 2,034,746 acres in subsurface mineral rights. 
Ownership of the subsurface mineral acres is not entirely clear but it 
is estimated to be owned primarily by the Crow Nation, with some 
allotted and non-Indian fee ownership. The significant natural 
resources within the reservation boundaries are recognized but remain 
largely untapped.
    The Crow Nation has developed a limited amount of its resources, 
typically with royalty (and some tax) revenue received as the lessor. 
Even though we had some oil and gas development between the 1920s and 
1950s, most of our governmental revenue is derived from our 35-year 
relationship with Westmoreland Resources, Inc. Over that period, the 
Apsaalooke mine has produced about 150 millions tons of coal and is the 
largest private employer within the Crow Reservation.
    The Crow Nation has very substantial undeveloped mineral resources. 
It is estimated that we own 3 percent of the world's coal resource, 
exceeding 10 billion tons. We have been exploring our oil and gas 
reserves, and preliminary estimates believe them to be significant. In 
addition, we have large deposits of industrial minerals, such as 
limestone and bentonite. Finally, preliminary data suggests that we 
have class 5/6 wind energy as well as other renewable resources.
III. My Administration's Vision on Energy Development
    Given our vast mineral resources, the Crow Nation can, and should, 
be self-sufficient. My goal is clear. My administration desires to 
develop our mineral resources in an economically sound, environmentally 
responsible manner that is consistent with Crow culture and beliefs. 
The Crow people are tired of saying that we are resource rich and cash 
poor.
    My larger vision is to become America's energy partner and help 
reduce America's dependence on foreign oil. Over the next 40 years, the 
World Energy Council predicts that the world will need to double 
today's level of energy supply to meet increased demand. Primary energy 
sources, such as coal, oil and gas, have a finite life and the future 
must have renewable energy, new technology to make existing producers 
more efficient and environmentally sound, and an overall reduction in 
people's per capita use of energy.
    My administration stands ready to meet the global energy challenge 
and take the risks necessary to meet short-term demand. With a 
substantial Crow coal resource, perhaps the Crow government can build 
the first coal-to-liquids plant in North America with capture and 
storage of carbon. If so, then I can contract with the U.S. Air Force 
to supply clean diesel fuel that will meaningfully reduce carbon 
emissions throughout the world, reduce America's dependence on foreign 
oil, and provide a safe and secure supply to our national defense--but 
only if Montana and the federal government take that risk with me.
    Below, in section VI, my administration has put forth its best 
effort and ideas to reduce or even eliminate the barriers that still 
exist to accomplishing my vision, with benefits to the Crow Nation, 
Montana and America. More than anything, I desire to improve the Crow 
people's quality of life, create a future with good-paying jobs and 
employment benefits within the Crow Reservation, and provide hope and 
prosperity for the next seven generations of Crow citizens. Our mutual 
desires are within reach.
IV. Our Experience in Ascertaining Quality and Quantity of Resources
    Since the beginning of my administration as Chairman of the Crow 
Nation Executive Branch, I have sought to ascertain, identify and 
evaluate the resources in order to effectuate my vision. I appointed an 
oil and gas committee (``OGC'') to begin this work. For the past 6 
years, OGC has worked diligently to enhance the Crow Nation's 
reputation as a serious energy partner.
    OGC has also been evaluating options, meeting with numerous energy 
partners, and engaging federal agencies for their regulatory review and 
approval as well as seeking assistance, financial and technical, from 
federal agencies to ascertain the quantity and quality of our 
resources. As noted earlier, OGC has been solely responsible for 
attracting and retaining companies that have successfully located oil 
and gas reserves within the Reservation. In addition, OGC cultivated a 
serious coal partner relationship that very nearly resulted in a 
transaction for the largest greenfield coal mine to be opened in the 
western United States in the past 40 years.
    During my administration, we have worked with numerous federal 
agencies in the Department of Interior and would like to acknowledge 
and thank each agency for its efforts in assisting us. In particular, 
we have received help from the Office of Indian Energy and Economic 
Development (OIEED), under the auspices of Mr. Robert Middleton. 
Especially noteworthy is the consistent assistance we receive from a 
division under Mr. Middleton--the Division of Energy and Mineral 
Development (DEMD), located in Denver, Colorado. DEMD is led by Mr. 
Stephen Manydeeds.
    DEMD is a group of geotechnical experts that has provided us with 
professional appraisals of our mineral assets, including coal, oil, 
natural gas, wind energy, and limestone. DEMD is staffed by experienced 
industry-based professionals who provide sound advice and counsel on 
energy and resource development as well as strategic business-decision 
making. DEMD's advice has included business development, strategic 
planning, resource marketing, identification of potential industry 
partners, detailed economic analyses, and assistance with negotiation 
of complex development agreements.
    In addition, the Crow Nation has engaged a variety of private 
energy consultants in the past 18 months to accelerate processes with 
regard to specific resources, such as coal and wind. The consultants 
were specifically asked to examine identified resources based on their 
development potential and market opportunities, create a preliminary 
strategic development plan around the leading resource possibilities, 
and identify project opportunities to create jobs and provide long-term 
sustainable revenues.
    With the tribal, federal and private teams, we have had some 
success (and some state assistance as well under Montana Governor Brian 
Schweitzer and his staff). Because development takes time and our 
budget is limited, we must rely primarily on our tribal and federal 
teams and efficiently utilize outside counsel and private consultants 
where necessary. I strongly believe a mix of experience and 
perspectives on energy development will be crucial to making my vision 
a reality.
V. Past and Present Challenges
A. The Past
    Even though circumstances change, it is important to remember the 
past and causes that have prevented the Crow Nation from realizing its 
potential. The past is revealing. A close examination of federal Indian 
law, and Crow history in particular, demonstrates a pattern of 
invariable changes to the legal and political status of tribal 
governments and their citizens in order for non-Indians and American 
governments to unjustly capture wealth, especially when it comes to the 
subject of energy resources.
    I think the following quote from a Commission of Indian Affairs 
Report from 1876 is particularly demonstrative of America's treatment 
of Indian resources in general and Crow minerals in particular: 
``Whenever an Indian reservation has on it good land, or timber, or 
minerals the cupidity of the white man is excited, and a constant 
struggle is inaugurated to dispossess the Indian, in which the avarice 
and determination of the white men usually prevails.''
1. Railroad Rights-of-Way
    For example, in 1864 (prior to the negotiation of the 1868 Treaty) 
Congress passed an act granting the Northern Pacific Railroad a right 
of way from Lake Superior all the way to Puget Sound. In the act, 
Congress ``provided that the United States should extinguish as rapidly 
as may be consistent with public policy and the welfare of the Indians 
the Indian titles to all lands falling under the operation of this 
act.'' Even though this right of way cut a large swath out of Crow 
Country, this act is not mentioned in the 1868 Treaty. According to a 
1940 claims case, the U.S. knew that the land the Crow Nation reserved 
would be affected by this land grant.
    The three railroad acts of 1887, 1888 and 1889 are virtually 
identical; each unilateral federal act took Crow land for a different 
railroad. The railroads were the Rocky Fork and Cooke City Railway 
Company, Billings Clark's Fork and Cooke City Railroad Company, and the 
Big Horn Southern Railroad Company. The unilateral agreements 
promulgated by the U.S. Congress ignore the 1868 Treaty provision 
requiring approval by a majority of tribal members for any cession of 
Crow land. The requirement of tribal consent was at the discretion of 
the President.
    The Secretary of the Interior was to ``fix the amount of 
compensation to be paid the Indians for such right of way.'' According 
to a 1935 claims case, the following compensation was paid for the 
respective takings: the 1887 taking of 700 acres was for $875.64; the 
1888 taking of 1,377 acres was for $4,133; and the 1889 taking is not 
mentioned. Each taking weakened the Tribe's ability to develop its own 
resources and compensation was only marginally provided, if at all.
2. Yellowtail Dam and Hydropower
    One of the primary opportunities for the Tribe to develop its 
energy resources was taken from it when the United States chose to 
develop the resource for itself. The Bureau of Reclamation's Yellowtail 
Dam on the Big Horn River within the Crow Reservation was authorized as 
part of the Pick-Sloan Missouri Basin Project by the Flood Control Act 
of 1944. The value of this site was no secret; in fact, the 1920 Crow 
Allotment Act, Section 10, had guaranteed that unallotted lands within 
the Crow Reservation that were chiefly valuable for the development of 
water power would be reserved from allotment or other disposition under 
that act, for the benefit of the Crow Tribe of Indians.
    This guarantee, for which Tribal members and their supporters 
worked tremendously hard, was ignored. On October 19, 1949, an Opinion 
by the Assistant Solicitor of the Department of the Interior even held 
that there was no authorization for forced acquisition of the land 
needed for the construction of Yellowtail Dam. However, a Solicitor's 
Opinion of February 3, 1954, found that existing reclamation laws did 
grant that authority.
    In 1958, the United States condemned Crow Reservation land for 
building Yellowtail Dam and then argued that no compensation to the 
Tribe for the land's water power value was necessary. In contrast, the 
Flathead Indians and Warm Springs Indians received full power-site 
value for tribal lands used to build Kerr Dam and Pelton Dam under the 
Federal Power Act. In U.S. v. 5,677.95 Acres of Land, More or Less, of 
Crow Reservation, State of Mont., 162 F. Supp. 108 (D. Mont. 1958), the 
court found that Congress intended for Yellowtail Dam land to be 
condemned but the Tribe was entitled to compensation based on the 
land's water power value.
    Yellowtail Dam became operational in 1966. The dam generates over a 
half billion kilowatt hours of power per year, even during drought 
conditions. To date, the power generation revenues have exceeded $600 
million dollars. Although the Crow Nation did receive a couple of 
million dollars for the land takings to create Yellowtail Dam, the Crow 
Nation did not receive, nor has it ever received, a payment for the 
ongoing revenue from power generation.
3. Land
    Most of the land loss within Crow territory is the result of non-
Indian ownership of large tracts of land in violation of the Crow 
Allotment Act, Section 2, which aimed to protect the Crow land base by 
placing limitations on the sizes of parcels that could be owned by 
individuals and corporations. These violations have led to clouded 
title for most landowners within the Reservation. More than 800,000 
acres of land within the Reservation (over a third of the total 
acreage) was already in fee status by the year 2000; approximately 
600,000 acres of fee land continue to be owned in violation of Section 
2.
    In addition, the Crow Indian Reservation land base has been 
decimated by fractionated ownership of various allotments. The 
Department of the Interior estimates that over 10 percent of all 
fractionated lands within Indian country are actually within the Crow 
Reservation. By meaningfully addressing the fractionation issue at 
Crow, we would be making a significant impact on the national problem 
The Crow have numerous parcels of allotted lands that have more than 10 
owners and sometimes more than 100 owners.
    Some federal laws address consent provisions, but this issue (and 
clouded title, discussed above) is very problematic for energy 
development. The consent provisions that exist are difficult to adhere 
to, and numerous misstatements of the law can be found in any set of 
transactions. Owners of fractionated interests, minority owners in 
particular, have great difficulty in having their voices heard or in 
being fairly compensated for their interests. In general, business 
partners are reluctant to submit to land tenure systems they cannot 
understand.
B. Present
1. Practical Issues
    Despite the fact that the Crow Nation has substantial resources, 
numerous practical problems arise from the previously described 
history. The OGC and our energy partners, actual and potential, have 
experienced, and continue to experience, systematic problems in trying 
to create energy development. As demonstrated by the Cobell litigation, 
the Bureau of Indian Affairs (BIA) has a variety of issues that 
consistently create barriers and delays to resource development.
    For example, the OGC created and the Crow legislature approved an 
oil and gas lease in January of 2005, but development did not begin 
until September 2007 because of an extremely slow BIA approval process. 
Within the approval process of that lease, an inventory of net mineral 
acres for the Crow Reservation was reported as 94,000 acres. However, 
after OGC and the energy partner reexamined the statistics with land 
information, an additional 50,000 net mineral acres was discovered for 
the Crow Nation (the 50,000 net mineral acres is worth $250,000). An 
error of this magnitude would be simply unacceptable in many contexts, 
but in our experience it is not surprising and is far from unique.
    BIA records for surface and mineral ownership are erroneous, 
missing and out of date. These problems cause significant delay with 
preparation of environmental documents and overall land records 
necessary for business transactions. It is extremely difficult to 
compete with off-reservation development because of these problems. 
Many companies view this, in addition to all other problems, as another 
prohibitive cost of doing business within the Crow Reservation.
    In a similar example, recently with a separate lease, OGC and an 
energy partner discovered another error in records. The Bureau of Land 
Management had turned over abandoned gas wells to the surface owner. 
However, upon review, it was discovered that the minerals actually 
belonged not to the surface owners but to the Crow Nation. It is hard 
to imagine this type of scenario occurring regularly with other 
governments and their energy partners without serious efforts to change 
the status quo in government regulation.
    Finally, the Department of the Interior, and in specific the BIA, 
lacks necessary resources for even routine governmental regulatory 
functions. For example, the BIA area office in Billings, Montana, has 
one primary individual to work on environmental issues for eight (8) 
different Indian nations. If multiple tribes are exploring their 
resources and/or seeking approval of resource transactions (joint 
ventures, leases, etc.), it simply takes additional time to obtain 
approval--even with the best efforts of particular employees within the 
BIA.
2. Jurisdiction and Tax Issues
    In an important civil jurisdiction case, Montana v. U.S., 450 U.S. 
544 (1981), the U.S. Supreme Court held that title to the bed of Big 
Horn River passed to Montana upon its admission to the Union, and did 
not vest in the Crow Nation. In addition, and very important to energy 
resource development, the Court held that the Crow Nation did not have 
presumptive civil jurisdiction over non-Indians on non-Indian fee land 
unless they met one of two specified exceptions. Both exceptions have 
proven elusive, if not impossible, to satisfy in the years since the 
decision.
    Further, in Strate v. A-1 Contractors, 520 U.S. 438 (1997), the 
U.S. Supreme Court held that a public right-of-way across Indian land 
was equivalent to non-Indian fee land and thus not subject to tribal 
jurisdiction. Although it is true that an Indian nation can contract 
around Montana and Strate, the Crow Nation still encounters substantial 
difficulties when it tries to address pockets of fee land within its 
boundaries for exploration activities, surface access and right-of-way 
agreements. Moreover, companies with rights-of-way across Indian 
country protested or simply stopped paying taxes to Indian nations, 
correspondingly reducing tribal governmental revenues and services.
    Moreover, this overall jurisdictional framework adds increased 
government regulatory authority over any given energy resource 
transaction (e.g., state, county and city)--another disincentive to 
doing business in Indian country. Therefore, at Crow and elsewhere in 
Indian country, energy partners must pay many additional costs and 
tribal governments must promise to protect the project by freezing 
future legislation and must agree to apply tribal taxes over the term 
of the project so that it does not exceed state taxes immediately off 
of the reservation to alleviate obstacles and level the development 
playing field.
    In addition to Montana and Strate, the U.S. Supreme Court has 
further weakened the power of Indian nations to work toward economic 
self-sufficiency through a series of Indian tax decisions in the past 
30 years--almost invariably increasing state tax authority to the 
detriment of tribal tax authority. In Indian country today, with 
relatively small geographic areas comprising some of the most 
impoverished communities in the United States, energy resources are 
potentially subject to five concurrent government taxes (federal, 
tribal, state, county and city). Energy partners and investors simply 
do not want to do business where there is substantial uncertainty and 
risk of triple or quadruple taxation.
3. Recent Legislation
    With our partners and allies, we have spent valuable time 
protecting our rights to develop our energy resources. In 2006, we 
participated in numerous discussions related to Section 1813 of the 
2005 Energy Policy Act, Energy Rights-of-Way Study. Like several other 
Indian nations, we argued that we should be able to negotiate our own 
energy rights-of-way agreements with our business partners, rather than 
have another federal law dictate those terms. Given our long history of 
battles over energy resources, I hope that legal and political 
decision-makers will appreciate our past and realize that we fight, 
forever, for our right to make decisions and develop our own resources, 
rather than see outsiders benefit from our energy wealth.
    More recently, we have been seeking support to protest the unfair 
standards with drilling permit fees (Application for Permit to Drill, 
``APD'') by the BLM for energy development requests in Indian country 
required by the Fiscal Year 2008 Consolidated Appropriations Act. 
Montana Governor Brian Schweitzer (and Senator Max Baucus) wrote 
letters to inquire why Secretary of the Interior Kempthorne was 
applying a prohibitive $4,000 filing fee for APDs involving Indian 
mineral resources.
    Mr. Stephen Allard, an Assistant Secretary for Land and Minerals 
Management, recently responded in a letter dated April 14, 2008, that 
the fee was not discretionary and it was necessary to offset a lack of 
federal appropriation to process the applications. In contrast, a 
company must pay $100 to the Montana Board of Oil and Gas for a 
drilling permit immediately off of the Crow Reservation and have the 
permit within three days. This discrepancy chills Indian mineral 
development and is the latest example of another unnecessary 
bureaucratic hurdle that slows, if not precludes, new investment in 
energy development in Indian country.
VI. Recommendations
A. DEMD
    In sum, DEMD has been invaluable (as well as Crow OCG) and we would 
not be in a favorable position to engage in large scale industrial 
development without DEMD's assistance. I once again want to express our 
sincere thanks to Mr. Middleton and Mr. Manydeeds. However, we would 
suggest that DEMD continue to receive your support, financial and 
otherwise, in order to assist the Crow Nation and other Indian nations 
to develop their energy resources (or if they have the financial 
capacity, assistance with participation in the overall energy market) 
and become self-sufficient.
B. Federal Water Legislation
    My administration also views our federal legislation ratifying Crow 
(and non-Indian) water rights as central to any and all energy 
development within the Reservation. Within the short term, the Crow 
Nation will submit federal legislation to ratify its Water Compact with 
the State of Montana and to finalize a federal settlement of its water 
claims. The Compact was approved by the Montana Legislature in 1999. 
For any large scale energy development, our energy partners need 
certainty and predictability to be able to use water for development 
without fear of litigation or uncertainties.
    As important, upon ratification of the Compact by the United States 
and by the Crow people, the Crow Nation will assume the administration 
of its water right on the Reservation. The federal financial 
contribution to the settlement will provide funds for the development 
of sorely needed water systems on the Reservation (primarily safe, 
clean drinking water throughout the Reservation) as well as the repair 
of the Crow Federal Irrigation Project. The Tribe's largest single 
protected right under the Compact is 500,000 acre-feet per year from 
the Bighorn River, subject to numerous limitations to protect existing 
users, both Tribal and state, as of 1999, and to protecting the in-
stream flow of the famous and sacred Big Horn River.
C. Crow Land Restoration Act
    Another extremely vital piece of legislation to support in the 
development of our energy resources concerns the strengthening of the 
tribal land base, previously weakened by allotment, fractionation, and 
other historic processes. Today, our approach is to respect reliance 
interests and reduce fractionation by repurchasing land from willing 
buyers. Senate Bill Number 1080, the Crow Tribe Land Restoration Act, 
was introduced by Senator Max Baucus on April 10, 2007. It would 
authorize the Secretary of the Interior to develop a program to help 
the Crow Nation acquire and manage land and interests in land on the 
Crow Reservation, with purchases funded through a loan to the Nation of 
up to $380,000,000.
D. Tax
    We also ask for continued interest and efforts on Indian tax 
legislation, including long-term renewals of the following: (i) tax 
credit on Indian coal from the 2005 Energy Policy Act; (ii) accelerated 
depreciation in Indian country, excluding gaming, provisions of the 
Internal Revenue Code (IRC); (iii) an enlarged scope of Indian 
employment tax credit for private employers on Indian reservations; and 
(iv) treating tribes as states in all aspects under the essential 
governmental function test in existing sections of the IRC.
    Similarly, it is necessary for a federal legislative clarification 
that the tax base in Indian country, existing and future, is subject to 
the sole tax authority of Indian nations on the local level (pre-
empting state and local tax authority) for funding to provide tribal 
governmental services. Multiple governmental taxes in some of the 
poorest counties in America are unjust and are a core problem for 
energy development in Indian country. It is my opinion that treating 
tribes as states for all tax purposes will begin to ease the tax and 
regulatory burdens on energy partners seeking to assist Indian nations 
to become the primary governing entity, and an energy partner with the 
states and federal government, in Indian country.
Conclusion
    We definitely could use your assistance in setting the foundation 
to make our vision a reality.
    We have been very busy in working to develop our energy resources 
and to remove obstacles to successful development. We hope to be a 
worthwhile model for other tribes, and to live in the near future in a 
time when our own resources, in our own hands, provide everything 
necessary for the health, hopes and future of our people.
    It is critical that Congress act to protect Indian nations' natural 
resources and secure Indian nations as the primary governing entity 
over their own homelands. Not only will this work be important in its 
own right, but it will have numerous benefits for the local communities 
and federal government as well. The Crow Nation has been an ally of the 
United States all through its history.
    Today, the Crow Nation desires to develop its vast natural 
resources not only for itself, but to once again help the United States 
with a new goal--achieving energy independence, securing a domestic 
supply of valuable energy, and separating itself from its dependence on 
foreign oil. The Crow Nation, as many Indian nations, are veterans of 
the United States Armed Forces and we have a special understanding and 
respect for what it could mean to our sons and daughters in coming 
years if all of our energy needs were met here at home.
    It is time for the Crow Nation to become an energy partner. 
However, my vision can only become a reality with your (and local 
government) assistance. I strongly feel that the vision starts today, 
with your help and assistance. Mr. Chairman and Committee members, 
thank you again for the opportunity to testify on Indian Energy before 
you today. I would be happy to answer any questions.

    The Chairman. Chairman Venne, thank you very much. We 
appreciate your being with us today.
    Next we will hear from Steven Began. He is the General 
Manager of the Dine Power Authority at the Navajo Nation, 
Window Rock, Arizona. Mr. Begay, thank you for being with us. 
We appreciate your being here. You may proceed.

   STATEMENT OF STEVEN C. BEGAY, GENERAL MANAGER, DINE POWER 
                    AUTHORITY, NAVAJO NATION

    Mr. Begay. Thank you, Mr. Chairman. I am the General 
Manager of the Dine Power Authority, a Navajo Nation entity 
responsible for utility-scale power generation and transmission 
and development on Navajo lands. Thank you for this opportunity 
to provide testimony on the energy development efforts of the 
Navajo Nation and the lessons that we have learned.
    DPA has three major projects under development. Under the 
private partners, we are close to commencing construction on 
nearly $4 billion worth of energy projects. DPA's first major 
project is the Navajo Transmission Project, the NTP, a 469-mile 
high voltage transmission line connecting the generation-rich 
Four Corners region of the desert southwest with the growing 
load demand in States such as Arizona, Nevada and California. 
This permitted project is the only high-voltage transmission 
system of its size and length that is ready for construction in 
the United States today.
    DPA's second major project is the Desert Rock Energy 
Project, a $4.3 billion mine-mouth, coal-fired power plant. 
Desert Rock would have the lowest regulated emissions of any 
pulverized coal plant in the United States. Desert Rock is 
absolutely critical to the economic future of the Navajo 
Nation, one of the most impoverished areas of the United 
States, and will create many jobs and generate approximately 
$1.5 billion to the Navajo treasury in the first 30 years of 
operation.
    Regrettably, Desert Rock's air permit is being delayed by 
the U.S. Environmental Protection Agency. Until the EPA issues 
that air permit, it will not be possible to complete 
negotiations to finance the project.
    DPA's third project is the Dine Wind Project, one of the 
largest wind generation systems under development in the U.S. 
today. The Dine Wind Project will provide up to 500 megawatts 
of wind power. The wind project will balance the Nation's 
baseload energy portfolio and can utilize the Navajo 
Transmission Project.
    In developing these large projects, we have learned several 
valuable lessons. Large-scale energy projects are extremely 
complicated and expensive and take a long time to develop, even 
under optimal conditions. Second, building tribal capability 
and capacity is critically important but takes time and money. 
These projects are capital-intensive. Although the Navajo 
Nation put approximately $20 million into the projects 
described above, Federal funding and incentives remain 
critically important to their advancement.
    When it comes to financing, our largest challenges, our 
biggest challenges have not been the traditional barriers of 
dealing with a lack of collateral or dispute resolution, but 
rather, the lengthy delays in the Federal permitting process, 
putting us at a cost disadvantage and time to non-Indian 
developers. Concern regarding global warming has affected our 
coal plant plans. Fortunately, Desert Rock's ultra-
supercritical boiler design will reduce carbon emission over 
typical coal plants by approximately 20 percent. Moreover, the 
Desert Rock site is unusually well suited for testing large-
scale carbon capture and sequestration technologies as it sits 
atop a geological structure deemed perfect for carbon storage.
    Congress should aggressively finance carbon capture and 
sequestration demonstration projects. Should Congress do so, 
Desert Rock is uniquely positioned to be a first mover in this 
area. Consistent with the Federal trust responsibility, Federal 
agencies can do more to help. For example, DPA has been 
frustrated with the delay at the EPA in issuing an air permit 
for Desert Rock. We consider the delay to be unacceptable on 
the merits and in violation of the trust responsibility.
    Congress can support tribal efforts with more aggressive 
economic and tax-related legislation, including long-term 
renewal of Excel-rated depreciation credit for businesses 
locating on Indian reservations and the Indian worker tax 
credit. Congress should also pass legislation to make it easy 
for tribes to transfer any tax benefits they may receive for 
energy production to their private partners. Congress needs to 
provide priority transmission access to tribal energy projects. 
Congress should create and expand preference contracts for 
purchase of tribal energy. A tribal renewable portfolio 
standard would give tribal energy projects greater access to 
long-term purchase power contracts.
    Thank you again for this opportunity to testify. A more 
detailed testimony has been submitted to the Committee. My 
colleagues and I are available to answer any questions the 
Committee may have.
    Thank you.
    [The prepared statement of Mr. Begay follows:]

  Prepared Statement of Steven C. Begay, General Manager, Dine Power 
                        Authority, Navajo Nation
    Chairman Dorgan, Vice Chairman Murkowski and members of the Senate 
Committee on Indian Affairs, thank you for this opportunity to provide 
testimony on the energy development efforts of the Navajo Nation and on 
lessons that we have learned.
    I am the general manager of the Dine Power Authority, also known as 
DPA. DPA is the Navajo Nation entity responsible for utility-scale 
power generation and transmission development on Navajo lands. Our 
mission is a reflection of the Navajo Nation's sovereignty over its 
land and resources. DPA is the oldest tribal energy enterprise in the 
U.S. today dedicated to wholesale energy development, including fossil 
fuel and renewable energy. The purpose of DPA's energy projects are to 
benefit the Navajo people, and promote economic development on the 
Navajo Nation. I would like to describe a few key points about three 
major projects that DPA is developing, share our experiences and 
thoughts on problems facing tribal energy, and offer some solutions to 
those problems.
    DPA's first major project is the Navajo Transmission Project (NTP), 
a 469-mile high voltage transmission line connecting the generation-
rich Four Corners region of the desert southwest with the growing load 
demand in states such as Arizona, Nevada and California. This permitted 
project is the only high-voltage system of its size and length that is 
ready for construction in the United States today. Once built, the 
Navajo Transmission Project will eliminate a major gap in the 
Southwestern high-voltage transmission grid, a long-term goal of the 
Federal Energy Regulatory Commission, regional utilities and consumers. 
The NTP serves a variety of purposes, including increased stability and 
reliability in the event of outages and impacts to power plants and 
transmission lines; relieving constraint on existing, aging 
transmission systems in the region, and facilitating new generation 
from both renewable and fossil-fuel-based sources. Navajo coal is an 
essential component to providing reliable baseload power that will 
assure that resources become available to make transmission affordable 
and available to regional renewable projects that on their own cannot 
finance significant transmission line development. This brings me to 
DPA's next major project.
    DPA's second major project is the Desert Rock Energy Project, a 
$3.4 billion mine-mouth, coal-fired power plant that would generate up 
to 1,500 MW located on the Navajo Nation in the Four Corners Area of 
New Mexico. Desert Rock would have the lowest regulated emissions of 
any pulverized coal-fired plant in the United States. This project, 
which would create thousands of jobs during its four-year construction 
phase, 200 permanent, family-wage jobs in the power plant and another 
200 well paying jobs in the adjacent Navajo Mine during its lifespan, 
is absolutely critical to the economic future of the Navajo Nation, one 
of the most impoverished areas of the United States, with 50 percent 
unemployment. The project would generate approximately $50 million per 
year in the first year of operation and increase each year after that, 
resulting in $1.5 billion to the Navajo treasury in its first 30 years 
of operation.
    The major permitting processes, including the federal Environmental 
Impact Statement (EIS) process and the federal Clean Air Act 
construction permit (PSD) process are nearing completion for the Desert 
Rock Project. The Final EIS is expected within the next few months, but 
the air permit is being delayed by the U.S. Environmental Protection 
Agency (EPA). The EPA deemed Desert Rock's air permit application 
complete four years ago in 2004, and pursuant to the Clean Air Act, the 
agency was required to issue a decision on the permit within 18 months. 
Despite significant additional studies to ensure compliance with Clean 
Air Act requirements, a lengthy and twice-extended public review and 
comment process, EPA has still not issued its decision on the air 
permit.
    Until the PSD permit has been issued, it will not be possible to 
complete negotiations on power purchase agreements or make progress on 
obtaining financing for the project. Further delay costs the Navajo 
Nation approximately $5 million of desperately needed dollars every 
month.
    DPA's third major project is the Dine Wind Project, one of the 
largest wind generation systems under development in the U.S. today. 
After a nationwide search and two years of discussions with different 
developers, reviewing a variety of technologies and with guidance and 
assistance from the U.S. Department of Energy and Sandia National 
Laboratories, DPA entered into detailed discussions with a short list 
of qualified wind developers. In 2006 DPA began a joint venture with 
Citizens Energy Corporation and Citizens Wind because of Citizens' 
strong commitment to working with Native communities, a proven track 
record to return significant profits from their operations back to low 
income citizens of Native communities, a willingness to provide a 
carried interest to the tribal energy enterprise for their development 
efforts, and a significant equity ownership opportunity (50 percent) 
offered to the tribe in the project.
    After conducting significant due diligence, DPA negotiated and 
entered into an agreement with Citizens in July, 2006 that began a 
joint venture of the tribal enterprise and the non-profit energy 
corporation to conduct feasibility studies, negotiate project 
development agreements and pursue preliminary discussions with local 
Chapters. From 2006 through 2007, Citizens and DPA collected wind data, 
evaluated transmission capacity, held meetings and conducted 
discussions with Navajo officials and local residents. On March 12, 
2008, President Joe Shirley, Jr., Vice President Ben Shelley, members 
of the Navajo Hopi Land Commission, DPA General Manager Steven Begay 
and other Navajo and DPA representatives meet at the Navajo Nation 
Washington Office to execute an Agreement in Principle to move forward 
with development.
    The Dine Wind Project will provide 500 MW of wind power at full 
buildout, with approximately 200 MW in phase one located in the Grey 
Mountain area of the Navajo Nation. Phase one alone could produce 
revenue of over $3-5 million per year for Navajo, with additional 
revenues to DPA & Nation through Project Equity Ownership. It would 
also create 100-200 jobs during construction and 10-20 permanent jobs, 
while building a Navajo skill and knowledge base through job training. 
A percentage of the profits would be provided for local economic 
development and assistance.
    DPA is in active discussions with energy companies, developers and 
others for a variety of other projects, including solar, coal 
gasification, distributed generation and other technologies and 
applications. DPA's projects have introduced the Navajo Nation, and 
tribes across the country, to new ways of doing business with the non-
tribal world, and these projects have generated significant interest in 
improving the quality of life across the Navajo Nation. But getting 
this far has not been easy. Tribal energy development faces a number of 
significant hurdles; some that are shared with non-tribal entities, and 
some that are more acutely felt by native communities. Some of the 
valuable lessons we have learned over the last decade include the 
following:

   Expectations need to be set correctly. Large scale energy 
        projects are extremely complicated, expensive and take a long 
        time to develop even under optimal conditions.

   Building tribal capability takes time and money. DPA has 
        built up its capability to be full-fledged partners with 
        private industry over many years.

   These projects are capital-intensive. Although the Navajo 
        Nation put about $12 million in tribal funds into the projects 
        described above, Federal funding, tax incentives and 
        prioritization for tribal energy projects remain critically 
        important to their advancement and will continue to be 
        important for such projects on tribal lands in the future.

   It takes time to find a private industry partner willing to 
        build on Indian lands. This is especially difficult when tribes 
        require, as DPA did, that the private partner be willing to 
        push the environmental standards to a new high, and in DPA's 
        case, be willing to add technologies that would reduce water 
        use. DPA was fortunate to find such a partner in Sithe Global 
        Power LLC for Desert Rock and Citizens Energy Corporation for 
        our wind projects.

    Without a doubt, the benefits from tribal energy development far 
outweigh the burdens of achieving a successful project, but there are 
ways to level the playing field so the hurdle is no higher on one side 
of the reservation boundary. The following are a few attainable 
solutions that Congress and the federal government can consider to 
address these issues:
    Addressing Carbon Emissions While Providing Reliable Baseload 
Power. Because approximately 50 percent of electricity generated in the 
U.S. today comes from coal, coal-fired generation must confront the 
challenge of reducing carbon emissions and their impact on global 
warming. New coal plants are meeting this challenge through high-
efficiency combustion, smart emission reduction technology and forward-
thinking design which allows for carbon capture and sequestration 
(CCS). Desert Rock's ultra supercritical boiler design and resulting 
combustion efficiencies will reduce carbon emission over typical coal 
plants by approximately 20 percent. In addition, proven, existing 
emission control technologies are combined to maximize reduction of 
pollutants, including a plant design with dedicated space for future 
emission control expansion and addition of CCS technologies. Notably, 
the Desert Rock site is unusually well suited for testing large-scale 
carbon capture and sequestration technologies:

   Approximately one mile below Desert Rock are two thick 
        saline aquifers, which can hold carbon as carbonic acid, capped 
        by a 1,000' shale layer, and separated by a limestone layer.

   Two studies confirm the feasibility of this formation as a 
        primary target for CO2 capture.

   There are several suitable depleted oil and gas domes for 
        CO2 storage available within 7-51 miles from Desert Rock.

   There are also several CO2 pipelines that pass within 
        relatively close proximity to the plant site, allowing for sale 
        of CO2 for enhanced oil and gas recovery.

    However, for any major CCS project to go forward at Desert Rock, or 
anywhere in the country, there are several significant challenges that 
must be addressed related to cost, equipment guarantees, liability and 
permitting. Only the Federal government is in a position to address 
these issues. DPA has consulted academic institutions, government 
agencies, government funded laboratories, private engineering firms, 
financial analysts, lenders, investors and technology vendors to 
discuss what efforts are needed to make CCS viable on large-scale power 
plants. A strong consensus among these and other key players that 
federal incentives such as transferable tax credits and CSS pilot 
projects on new, high-efficiency coal plants present some of the best 
opportunities in the U.S. to address carbon issues and still provide 
high quality, reliable, and affordable baseload energy from coal-fired 
power plants to consumers in the short term. Desert Rock is uniquely 
positioned to be a ``First Mover'' on such a major CCS demonstration 
project. The addition of CCS to the new generation of clean coal plants 
that is represented by Desert Rock stands to bring the highest return 
on this ``environmental investment'' as opposed to retrofitting older, 
less efficient coal plants.
    Overcoming Financing and Investment Obstacles. Historically, 
significant obstacles to obtaining financing and attracting investment 
in tribal energy projects have included the sufficiency of collateral 
(especially since most tribal lands in the 48 contiguous states are in 
trust status and only the mortgage interest on a lease of trust lands 
is usable as collateral), the problem of dual taxation (overlapping 
state and tribal taxes), attracting investors with tax credit appetite, 
delay and cost in obtaining federal permits and approvals, and the 
constant challenge of remaining competitive with non-tribal projects in 
securing long-term power purchase agreements in the face of more 
complicated and lengthy transaction and development periods. While DPA 
has negotiated innovative and low-risk business models in its current 
project agreements that will help facilitate investment, project 
finance and maximize tribal equity positions, the time and cost 
involved in reaching these agreements has been significant. For tribal 
projects to succeed, the time needed to obtain permits and the 
development costs must be comparable to non-tribal projects.
    In addition to the two suggestions above, I urge this Committee and 
Congress to also consider the following:

   Consistent with the Federal trust responsibility, Federal 
        agencies can do more to help. DPA has been frustrated with the 
        delay at the EPA in issuing an air permit for Desert Rock. We 
        consider the delay to be unacceptable on the merits and in 
        violation of the trust responsibility between the federal 
        government and Indian nations. All Federal agencies should 
        acknowledge their trust responsibility to tribes and should 
        dedicate the necessary resources to ensure that delays in the 
        Federal portion of the development process do not retard 
        overall project development.

   The Congress can support tribal efforts with more aggressive 
        economic and tax-related legislation. For instance, Congress 
        should renew, on a long-term basis, the accelerated 
        depreciation credit for businesses locating on Indian 
        reservations, as well as the Indian worker tax credit. These 
        provisions were part of the package of incentives DPA used to 
        attract large scale capital investment to the Navajo Nation, 
        but are set to retire at the end of this year. Congress should 
        also pass legislation to make it easy for tribe's to transfer 
        any tax benefits they may receive for energy production, but 
        cannot use because of their tax status, to their private 
        partners (e.g., H.R. 1954).

   Congress needs to more aggressively finance carbon capture 
        and sequestration demonstration projects. These projects are 
        essential to demonstrate that it is possible to capture carbon 
        emissions from coal-fired power plants, thereby assuring the 
        viability of America's cheapest and most abundant source of 
        energy. Desert Rock is perfectly situated to be one of these 
        projects and is something that the project developers would be 
        very interested in pursuing.

   Congress needs to provide priority transmission access to 
        tribal energy projects. Consistent with the outcome of the 
        federal right-of-way studies undertaken pursuant to the 2005 
        Energy Policy Act, Congress should take the next step and 
        provide incentives for tribes to gain priority access to high-
        voltage transmission systems for tribal energy projects, and in 
        certain cases, support the development of new transmission 
        projects on tribal trust lands. A number of mechanisms could be 
        employed to achieve this objective, with the result of 
        increasing the domestic energy supply, improving tribal 
        economies and strengthening our national transmission system.

   Congress should create and expand preference contracts for 
        purchase of tribal energy. Federal agencies, in particular 
        defense agencies and others with large energy demands, need a 
        steady supply of low cost, high-quality reliable power. Tribal 
        energy projects can meet that demand. A ``tribal renewable 
        portfolio standard'' for these agencies, and for other 
        recipients of significant federal assistance, would help build 
        domestic energy capacity and give tribal energy projects 
        greater access to long-term power purchase contracts. We ask 
        Congress to begin a national discussion with federally 
        recognized tribes to explore how tribes can meet the energy 
        needs of the Federal Government.

    Conclusion. After a total investment of nearly $30 million, DPA and 
its private partners are close to commencing construction on nearly $4 
billion worth of energy development projects. However, Federal support 
and involvement remains vitally important and has only been partially 
forthcoming. I hope these comments are useful to the Committee in 
understanding the real-life issues tribes must face in developing 
significant energy projects. Thank you, again, for this opportunity to 
testify.

    The Chairman. Mr. Begay, thank you very much for being with 
us.
    Finally, we will hear our witness from Alaska, Ms. Julie 
Kitka, who is the President of the Alaska Federation of 
Natives, in Anchorage, Alaska. Ms. Kitka, you may proceed and 
we appreciate very much your being with us today.

   STATEMENT OF JULIE KITKA, PRESIDENT, ALASKA FEDERATION OF 
                            NATIVES

    Ms. Kitka. Thank you, Mr. Chairman, Madam Vice Chairman, 
members of the Committee, ladies and gentlemen.
    Before I begin my testimony, I would like to ask our eighth 
grade class from Nome, Alaska, that is observing the hearing, 
if they could stand up and the Committee could welcome them. 
That is a long way from home.
    This was not planned, I came in the room and here they 
were.
    [Laughter.]
    The Chairman. We certainly welcome the eighth grade class 
from Nome, Alaska. How many miles are we from Nome, Alaska, 
sitting here in Washington, D.C.? Does anybody know? Four 
thousand five hundred miles. Perhaps Senator Murkowski wishes 
to welcome her constituents as well.
    Senator Murkowski. It is a long way to go to school, isn't 
it, kids?
    [Laughter.]
    Senator Murkowski. We welcome you and I am delighted you 
got an opportunity to be here as part of this hearing, focusing 
on an issue to those of us back home that is exceptionally 
important. I hope it is a productive day and a good visit here. 
Welcome to the Committee.
    The Chairman. Thank you very much for being here.
    Ms. Kitka. Thank you.
    Again, my name is Julie Kitka, the President of the Alaska 
Federation of Natives. We are honored to be presenting 
testimony today. We would ask that the hearing record be kept 
open to allow our tribes and corporations to provide additional 
detailed information.
    Alaska, which is our homeland, is an incredibly large land 
mass. It is two and a half times the size of Texas and has vast 
energy resources which are largely untapped and undeveloped. 
Alaska Natives, as the largest private landowners in the State, 
are committed to working with the State and the Federal 
Government and other private sector partners to help meet the 
energy needs of this Country.
    Just for example, our land holdings are a little bit over 
half of all the Native lands in the Country. We know that our 
Country needs to become more energy self-sufficient and less 
dependent on potentially unstable foreign sources. We are also 
aware that global competition for energy resources, especially 
from China and India, and many other rapidly developing 
countries, impacts our lives today and our future. Even news of 
oil finds in Brazil travels north to Alaska, as we learn that 
they may have discovered as many as 33 billion barrels of oil, 
which would make it the largest field every found. We know if 
further explorations confirmed this, we again will be all 
affected and U.S. national policy will change dramatically 
because of that.
    So we feel it is very timely to get very serious about what 
this Committee is looking at to both help our Indian 
communities and our Country. We are strong supporters of the 
development of alternative energy sources as an important 
avenue to add to our Country's energy sources. We offer our 
tribal communities in Alaska, in all their vastness, to be 
considered part of national demonstration projects on 
alternative energy technologies and as a proving ground to show 
how Alaska Native people and their institutions have the 
experience, the capital and the community relationships that 
will be necessary to effectively implement workable solutions 
to the developing energy crisis.
    Our Alaska Native corporations in particular have shown 
their ability to pull together both large and small projects 
and deliver results on time. Our recommendations are broad and 
expansive, including national State-wide and local 
considerations. We urge your consideration.
    I wanted to respond to Tribal Chairman Venne's comments 
about their desire to have greater self-sufficiency and greater 
involvement in owning companies that do their business and how 
they can do that. I want to suggest the Committee's 
consideration of the mentorship protege program that the SBA, 
Small Business Administration, has a way to partner up 
different Native tribes with other companies that have 
experience. We know in Alaska, one of the hats I wear is as 
Director of Chugach Alaska Corporation. We had a lot of lessons 
that we learned in trying to develop our coal resources and 
major mistakes that we made in doing it and how to do it right. 
I think maybe that mentorship protege program, if it is applied 
also to energy, might be a way to partner up tribes and their 
desires to be more in charge of their resources with other 
tribes and Native organizations that can assist.
    Again, Alaska is so diverse, I would like to focus our 
testimony primarily on the potential to make our local 
communities more self-sufficient in energy and capable to deal 
with rapid climate change and all its uncertainties. We are not 
going to get any closer to some of the rapid climate changes 
that are happening in the United States than the Arctic and 
what we see and what we are being told by scientists and 
others. So alternative energy resources, abilities to build our 
communities' capacity to deal with rapid change and uncertainty 
is very important.
    Because there is no one size that fits all in alternative 
energy resources for our communities, and because in Alaska, 
there is virtually unlimited potential of what can be done, we 
would like to invite and encourage the Committee to hold 
hearings in Alaska this summer that can focus on the potential 
for development of energy resources on Native-owned lands as 
well as what can be done to reduce the high cost of energy in 
our rural communities.
    On behalf of our membership and our tribes and our 
corporations, we sincerely hope that the Committee can find 
time to do that. We have a lot of people that are working and 
spending time on these important issues and a lot of people who 
couldn't travel back here that would like to testify. We really 
think that would be productive to your consideration of these 
important issues.
    Again, the undeveloped energy resources most often 
discussed for rural Alaska are small hydropower, using rivers 
to provide power to small communities and serving as America's 
experimental back yard for rural America: solar energy, sea 
wave action, biomass usage, coal, methane, geothermal energy. 
Each brings both its problems and barriers. Many alternative 
energy ideas look fascinating on paper but actually getting 
them up and operating in the lives of real people can be very 
complex and frustrating. We are committed to trying to make 
these alternative energy models work and offer our assistance 
and our membership's assistance in demonstrating and getting 
some of these things off the ground.
    For example, wind. Alaska has world-class wind energy 
resources, especially along the coastal and western regions of 
our State. There are 31 rural Alaska communities that already 
have good opportunities for wind generation and 17 more that 
are potentially attractive. I mention Cook Inlet Region Inc. 
(an ANCSA Corporation) and their Fire Island project as a prime 
example of a wind farm that could step up a lot faster if there 
were regulations that were published to the recent Energy Bills 
that were enacted by Congress but have not yet been 
implemented. In fact, we urge the Committee to ask the 
Administration to expedite those regulations and get that on 
track and fully implemented.
    Also hydro, solar, ocean wave action, Alaska has over 
34,000 miles of coastline, making it one of the best ocean 
energy resources in the world. I could go on, but I want to----
    The Chairman. I'll have to ask you to summarize. We have 
six witnesses. So if you would just summarize for us, I would 
appreciate that.
    Ms. Kitka. The last thing I wanted to bring to your 
attention, obviously we have a number of concrete 
recommendations we would urge your consideration. But I would 
be also remiss if I failed to alert this Committee and the 
Congress to the fact that right now, there is a full-blown 
economic crisis of energy costs in rural Alaska's villages. 
These high energy costs are stripping finances, money, cash, 
out of our families and our communities and threatening to roll 
back the tremendous progress that has been made over the last 
30 years in reducing poverty in our villages.
    It is an energy cost crisis. It is not a lack of fuel, it 
is the high cost. Again, the seriousness of it is, we (federal, 
state governments, and Native people) have for the last 30 
years been able to reduce poverty from 60 some percent down to 
20 percent. Without immediate help we are going to be seeing 
those poverty rates increase. We ask for some immediate help on 
bringing down the costs of energy and focusing on our very 
remote communities and their impacts.
    To give you an example, it is not just having hard times 
heating our homes in this extreme cold weather climate, but it 
is also putting food on the table, since so many of our people 
depending on hunting and fishing over the summer and winter 
time to put food on the table. The high cost of energy is going 
to reduce the ability of people to have access to fish and game 
and reduce our ability to put food on their tables. We are 
very, very concerned about that.
    We urge the Committee to ask our State government to do 
everything in their power to mitigate the problems that are on 
the ground right now. We are hearing calls asking for Federal 
declarations of disaster due to the potential concerns that 
people have on how they are going to put food on the table for 
this coming year because of those high costs.
    Again, in our testimony we have greater details. But it is 
a very, very serious problem and we urge the Committee's 
attention and ask for their assistance.
    [The prepared statement of Ms. Kitka follows:]

  Prepared Statement of Julie Kitka, President, Alaska Federation of 
                                Natives
    Mr. Chairman, Members of the Committee, Ladies and Gentlemen:
    For the record, my name is Julie Kitka; and I serve as President of 
the Alaska Federation of Natives. AFN is a statewide Native 
organization whose membership includes over 200 villages and tribes, 13 
regional Native corporations and 12 regional non-profit tribal 
consortia that contract and run federal and state programs.
    Thank you for inviting AFN to provide testimony today. I ask that 
the hearing record be kept open for a period of time to allow our 
tribes and corporations, and interested individuals to provide 
additional written comments.
    Alaska, which is our homeland, is an incredibly large land mass: it 
is two and half times the size of Texas, and has vast energy resources 
that are largely untapped and undeveloped. Alaska Natives, as the 
largest private landowners in the state are committed to working 
together with the state and federal governments, and other private 
sector partners, to help meet the energy needs of this country. We know 
that our country needs to become more energy self-sufficient, and less 
dependent on potentially unstable foreign sources. We are also aware 
that global competition for energy resources, especially from China and 
India, and many other rapidly developing countries impact our lives 
today and our future. Even news of oil finds near the Tupi field in 
Brazil travels north to Alaska, as we learn they may have discovered as 
much as 33 billion barrels, which would make it the third largest field 
ever found. We know if further explorations confirms this-we all will 
be affected in many ways. So it's time to get very serious about what 
we can do to help both our own communities and our country.
    We are strong supporters of the development of alternative energy 
sources as an important avenue to add to our country's energy 
resources. We offer our tribal communities, in their vastness, to be 
considered part of national demonstration projects on alternative 
energy technologies and as a proving ground to show how Alaska Native 
people, and their institutions have the experience, the capital, and 
the community relationships that will be necessary to effectively 
implement workable solutions to the developing energy crisis. Our 
Alaska Native corporations in particular have shown their ability to 
pull together both large and small projects, and deliver results on 
time. Our recommendations following this testimony will include 
national, statewide and local considerations.
    Let me now focus on energy development which has the potential to 
make our local communities more self-sufficient in energy and capable 
to deal with rapid climate change and all its uncertainties.
    Alaska is so large and diverse that one village's alternative 
resources may not be available elsewhere. Some areas have strong wind 
for electrical generation; but in other locations, there is no such 
thing. Thus, there is no ``one-size-fits-all'' solution for rural 
Alaska, making local solutions more specific and expensive. Because of 
the vastness of our State and it's virtually unlimited potential, we 
would like to encourage the Committee to hold hearings in Alaska 
focused on the potential for development of energy resources on Native 
owned lands, as well as on what can be done to reduce the high cost of 
energy in our rural communities.
    The undeveloped energy resources most often discussed for rural 
Alaska are small hydro power (using rivers to provide power to small 
communities and serving as America's ``experimental backyard'' for 
rural America), solar energy, sea wave action, biomass usage, coal, 
methane and geothermal energy; and each brings its own problems and 
barriers. Many alternative energy ideas look fascinating on paper, but 
actually getting them up and operating in the lives of real people can 
be very complex and frustrating.
    WIND: Alaska has world-class wind energy resources, especially 
along the coastal and western regions of our State. There are 31 rural 
Alaskan communities that already have good opportunities for wind 
generation--and 17 more that are ``potentially attractive.'' There are 
at least seven projects currently operational with another eight in the 
planning stages. The potential is obvious in locations like Kotzebue, 
Upper Cook Inlet, the Lake and Peninsula area. Barriers to harnessing 
wind power include high development costs, the need for trained 
maintenance, problems of land ownership and licensing, and the absence 
of public incentives to wind developers.
    HYDRO: Existing hydro generation produces nearly 25 percent of the 
state's electricity. But Alaska also has almost 45 billion watts of 
large and small hydro potential, more than any other state. Hydro also 
brings its problems, especially regarding environmental damage; but 
eight billion watts of the state's potential is in small projects that 
produce less than one million watts--and which don't require dam 
construction.
    SOLAR: Summer in Alaska produces a huge amount of sunlight; but 
winter darkness is the time of greatest energy demand. Large-scale 
solar projects do not presently have a great potential; but in some 
places, small projects are possible. This also requires the homeowner 
or community to make up-front capital investments, largely without 
public incentives from the state or federal governments.
    OCEAN WAVE ACTION: Alaska has over 34,000 miles of coastline, 
making it one of the best ocean energy resources in the world. The 
total wave potential, just on Alaska's southern coast, could produce 
almost 300 times the electricity used in the entire state each year. 
But the significant barrier to wave development is often the distance 
between the resource and the demand, requiring costly transmission 
infrastructure.
    GEOTHERMAL: A recent study points out four potential geothermal 
areas in Alaska: interior hot springs, southeast hot springs, the 
Wrangell Mountains, and a combination of the Alaska Peninsula and the 
Aleutian Chain. The value of geothermal power is magnified by the fact 
that it can produce both heat and electricity. But problems include 
accessibility to volcanic areas, transmission distances and possible 
environmental damage.
    BIOMASS: Alaska has a great amount of wood, wood waste and sawdust 
for potential use in space heating and electrical generation; and a few 
villages have begun to talk of making wood pellets from plentiful 
willow brush. Alaska's fish processing plants produce about eight 
million gallons of fish oil each year. With some chemical changes, this 
oil can be mixed (50-50) with diesel for generation. Community waste 
disposal produces 650,000 tons of garbage in Alaska each year; but 
again, design and capital costs are expensive and need public 
incentives.
    COAL: Coal is abundant in Alaska, but has higher CO2 
emissions than other energy sources. However, coal can be used to 
produce synthetic ``natural'' gas with and without carbon capture. The 
problem is that these gasification technologies are expensive and still 
under development. Finally, coal-bed methane has been identified in the 
Susitna Basin, but its economic potential has not been established. 
Coal-bed methane may also exist in specific locations close to some 
remote communities.
    Many of our villages in rural Alaska are actively working to 
develop a wide array of alternative energy projects. They see not only 
the potential for reducing the cost of energy, but also the tremendous 
manufacturing and sales and service components-wind and solar will need 
tailored products and service; alternative building materials, plans 
and supplies for hybrid homes and facilities that are now being 
developed and manufactured abroad, could be done in Alaska.
    It is critical for the continued viability of Alaska Native 
villages that dependence on petroleum be reduced, that local power 
generation and space heat shift to alternative energy sources, and that 
conservation methods be widely adopted. When provided with innovative 
energy solutions, our tribal communities are embracing them.
    But I would be remiss, Mr. Chairman, if I failed to alert Congress 
to the fact that right now there is a full-blown economic crisis of 
energy costs in rural Alaska's 230+ Native villages. Unbelievable 
energy costs threaten the very survival of remote communities. While 
all Americans suffer from rising costs of gasoline, home heat and 
electricity, rural Alaska is in a category all by itself. The increase 
in energy costs that communities are struggling with threatens to erase 
the past several decades of progress in reducing poverty. Whatever cash 
income many families have, just disappears into home heat and 
electricity. The ability for some of our people to even put food on the 
table will be affected by both the shortage and high cost of fuel. And 
we all know that these energy costs are expected to remain elevated.
    Native families in villages put together a combination of household 
cash income and subsistence foods each year; and the largest drain on 
the household's meager cash is the cost of residential space heat in an 
extremely cold winter climate. Most homes--especially those without 
access to firewood--are heated by oil-burning furnaces and stoves. The 
original cost of such oil, plus the transportation surcharge to get it 
into villages, create the highest heating costs in the U.S.
    Typically, oil is barged from Seattle to villages that have bulk 
fuel storage facilities, but some families have to haul oil from larger 
communities by boat. Nearly every winter, the normal water-based 
transportation system will break down for particular villages, due to 
weather or difficulty arranging bulk fuel purchases, and the village 
may be forced to fly in winter fuel supplies at even more exorbitant 
costs.
    A January, 2008 survey of fuel oil prices in 195 villages and 
regional centers found prices as high as $9.00 per gallon. More 
recently, the cost of oil in the village of Nikolski reached above $11 
per gallon. In December, January and February, the average village 
house can easily use four or more 55-gallon drums of oil for heating. 
In Arctic village, this means $1,980 or more for a single household per 
month; in Hughes, it requires $1,650; and in Illiamna, it takes $1,375. 
[We also include a snapshot of 22 villages, taken this week, to update 
these data.] I must add that space heat is critical to village 
businesses and public facilities as well. Some school districts are now 
having to cut into their instructional budgets in order heat and light 
their village buildings.
    Electricity in villages, which is mainly produced by community 
diesel generators, receives a state-sponsored subsidy that covers about 
30 percent of the homeowner's costs; but monthly household kilowatt/
hour charges in the bush are between three and seven times what the 
Anchorage homeowner pays per kilowatt/hour.
    The third use of energy in Native villages is for transportation, 
usually gasoline for snow machines, outboard motors and all-terrain 
vehicles. Machinery is necessary for subsistence food-gathering, which 
has to be capitalized with cash for store-bought equipment and energy. 
With gasoline prices between $5.00 and $7.50 per gallon in most 
villages, some Native families will either be unable to go to fish camp 
to get next winter's food supply or will be able to do this only 
sporadically.
    What does this mean for the future of Native villages? The 
combination of cold and hunger will inevitably force many Native 
families out of their traditional communities and into poor, crowded 
housing in Alaska's urban areas and/or regional centers. The social and 
economic problems that such a dislocation creates in people are 
enormous; and this adds to the burdens on the urban public sector. The 
rural-to-urban migration pattern in Alaska is already well along-and 
will become more obvious in the 2010 Census.
    So what can we do to deal with the immediate energy crisis in rural 
Alaska, and how can the Federal Government play a key role in 
addressing the problem? We believe a multi-faceted approach much be 
taken--one that provides greater economic opportunities for Native 
tribes and corporations to develop energy resources and one that drives 
down local costs of energy. Here are some practical ideas, as a 
starting place:
    Congress should urge the Department of Interior to publish 
regulations on an expedited basis to implement the programs authorized 
by the Indian Tribal Energy Development and Self-Determination Act, 
Title V of the Energy Policy Act of 2005, and Congress should fully 
fund their implementation. The Indian Tribal Energy Development and 
Self-Determination Act authorizes a variety of financial, technical, 
environmental and other programs that are intended to empower tribes 
and Alaska Native Corporations to develop energy resources. It 
authorizes the Department of Interior's Office of Indian Energy Policy 
and Programs to reduce energy costs, enhance tribal energy 
infrastructure and improve delivery of electricity to tribal 
communities. It also authorizes a multi-billion loan guarantee program, 
as well as other assistance to encourage development of renewable and 
non-renewable resources by tribes and tribal organizations. We have 
projects that are being held up because of the delay in the publication 
of regulations implementing this legislation. An important 
consideration for Alaska in the regulations is the inclusion of the 
Native corporations, who are crucial stakeholders. The Native 
corporations hold our land and resources, and must be included in any 
program affecting our land base.
    The congressionally created Denali Commission has requested Letters 
of Interest on developing small-scale alternative/renewable energy and 
energy efficiency projects in Alaska, with a budget of only $5 million. 
The Commission has received far more proposals that it has funds to 
support. Congress should increase funding to the Denali Commission for 
developing alternative/renewable energy projects. (Attached for the 
record is a matrix of the types of ideas and projects being proposed. 
This is included to give you a sense of the strong interest and the 
range of ideas.)
    State and federal strategies should be developed to provide 
economic incentives to conserve energy (including tax credits, low 
interest loans, rebates and grants to weatherize homes, and grants to 
purchase more efficient heating systems, wind generators, solar panels, 
and other technologies.
    Congress should increase the supply of energy by encouraging 
exploration and development of private, state and federal uplands, both 
onshore and off- shore. This can be done by providing incentives, such 
as OCS revenue sharing for Alaska's coastal communities, as has been 
done for Florida, Louisiana and Texas. If our communities could count 
on sharing some of the revenue from off-shore leasing for their own 
critical infrastructure and other needs, there would be greater local 
support for exploration and development in off-shore areas. AFN 
strongly supports the right of self-determination for our Native 
communities and urges that leases which have generated a lack of 
widespread community support be revisited and discussions opened up 
with affected communities to address their concerns.
    Congress should work closely with the State to ensure that in 
development of a Natural Gas Pipeline in Alaska, our communities have 
access to the natural gas that will pass through that pipeline through 
spur connections and pipe; and that ownership, partnership, and 
contracting opportunities for Alaska Native tribes and corporations be 
part of the development. Serious training funds should be appropriated 
for workforce development to ensure broad Native participation in the 
projects. If the Committee is interested, we could submit much more 
detailed information and recommendations on the natural gas project.
    Congress should provide additional funding for the Low-Income Home 
Energy Assistance Program (LIHEAP) in Alaska-and should urge the State 
to add its own appropriations for this excellent program. This country 
should be concerned when its poorest citizens are left to rely on the 
generosity of companies like Citco to meet their basic energy needs.
    Congress should urge, and provide incentives for, states to develop 
their own comprehensive energy plans, with effective processes for 
local input. Despite all the data-gathering on the severity of today's 
crisis, the State of Alaska has been singularly reluctant to plan long-
term for the energy needs of all Alaskans. This is perhaps the most 
critical step of all, since it can open the door to more specific 
solutions at the regional and community levels.
    Congress should create real opportunities for alternative energy 
projects, at least one major demonstration project within each Native 
region in Alaska. And further projects should be structured to 
encourage Native to Native partnerships, both within Alaska and with 
Native American tribal partners. There is much sharing of information 
and experience which can take place, and greater inter-tribal 
collaborations are to be encouraged.
    Congress should fully fund and implement the Energy Independence 
and Security Act of 2007, which was authorized last year. That bill 
includes a host of provisions to further renewable energy development, 
including a Renewable Energy Deployment Grant Program that would 
provide federal grants for up to 50 percent of the cost of building a 
wide variety of renewable electricity projects, including wind, 
geothermal, ocean, biomass, solar, landfill gas and hydroelectric 
projects in Alaska. It provides for a federal grant program 
specifically to help with construction of geothermal energy projects in 
areas of high electricity costs like rural Alaska.
    Congress and the State should provide homeowners with incentives to 
shift to supplemental alternative energy, including a weatherization 
programs, rebates for installation of energy saving changes.
    Congress should enact and fund S. 2232, the Native American 
Challenge Demonstration Project Act, creating a total of five pilot 
projects in remote, predominately Native American areas modeled after 
lessons learned from the US experience in providing foreign aid to the 
developing world. The project would use a compacting model to channel 
significant development funds to implement locally designed economic 
development strategies, including energy strategies. The objectives 
would be to enhance the long-term job creation and revenue generation 
potential of Native economies by creating investment-favorable climates 
and increasing Native productivity.
    In order to supplement this brief outline of major energy 
opportunities in Alaska, I will provide the Committee with a number of 
professional studies on rural energy potentials.
    Finally, Mr. Chairman, I am hoping that the Committee will be able 
to hold energy hearings in Alaska this summer; and I recommend that 
they be held in regional centers (like Kodiak, Dillingham, Bethel, 
Nome, Kotzebue, Barrow and in southeast), rather than confining them to 
Anchorage or Fairbanks.
Attachment







    The Chairman. Thank you very much for your testimony, Ms. 
Kitka.
    Mr. Wells, let me ask, I have just received some 
information, there are 745 leases approved for the Three 
Affiliated Tribes and 70 pending approval. Does that sound 
right to you?
    Mr. Wells. What we had in the initial bid advertisement for 
November 2007 is 938 bids, 145,000 allotted acres and 54 
million on bonus payments. The report we had from Assistant 
Secretary Artman was 541 of the leases were approved and that 
13 million in bonuses were distributed.
    The Chairman. The reason I am asking the question about 
numbers is, your testimony suggests that the BIA has been 
essentially delinquent or has interminably delayed the approval 
of leases.
    Mr. Wells. Yes.
    The Chairman. What is the number of leases that have been 
delayed?
    Mr. Wells. For the information we have in front of us that 
was responded to by Secretary Artman, we are probably only a 
quarter of the way through.
    The Chairman. The Secretary sent some additional resources 
out, did he not?
    Mr. Wells. He has some details in from different area 
offices. But we still have some major problems with the 
timeliness of these. Adam Twenty Mandan called on me yesterday, 
knowing full well I was going to be here today, Chairman 
Dorgan. He is a former veteran of the U.S. Army, former council 
member and now 70 years of age, who wanted to express that he 
is still waiting, after three years of signing his lease, that 
it is too long.
    The Chairman. Yes. We are working with the BIA, this should 
not be--I assume, is part of the delay the fractionalization of 
this land?
    Mr. Wells. I believe in 1997 that might have been remedied 
by having the requirement that was very strict to lease a piece 
of mineral acreage on Fort Berthold that used to be 100 percent 
signature criteria of the Indian owners of the minerals. Today 
it is 51 percent. That has made a lot of the problems of delay 
and not getting a lease approved possible. But the issues now 
is a bid sale was held in December 2006 and in November of 
2007, those same high bidders of the oil and gas industry are 
getting the rug pulled out from underneath them from other oil 
and gas companies, offering a dollar more bonus, for instance.
    The Chairman. And if the same is completed, let me ask, are 
companies that are getting the leases, are being awarded the 
leases, are they moving quickly to develop the minerals?
    Mr. Wells. The second problem they are running into is the 
approval of the drilling permit?
    The Chairman. By EPA?
    Mr. Wells. The BLM and the BIA.
    The Chairman. Okay.
    Mr. Wells. This Black Rock Resources Agreement was passed 
by the full business council in January of 2005. They have 
finally been able to split a well in April of 2008. That took 
three years and two months.
    The Chairman. I understand your frustration about this. You 
have minerals, you have potential new wealth for a tribe that 
desperately needs it and then you have these interminable 
delays by Federal agencies. We are going to try to follow this 
through with the BIA, the BLM, the EPA. There are some EPA 
issues as well. These areas are in such desperate need of 
economic development.
    Mr. Wells. Yes.
    The Chairman. Here we have an opportunity for economic 
development that is very substantial. And instead of being 
helpful, the Federal agencies are going into their typical 
shell game, and that is, things get subsumed in interminable 
delays. That is just not fair and it is not right and it is 
going to retard economic development.
    Chairman Venne and Mr. Begay also talked about the need 
this year to extend the tax incentives that exist on 
reservations for certain Indian economic activities. And we 
have legislation by Senator Baucus and Senator Grassley to do 
that. I also think it is important that we extend them for more 
than one year. To extend these things short-term doesn't give 
developers an opportunity to look at three and five-year plans 
for developing economic plans on reservations. So all of these 
are areas that we need to be attentive to. Again, I say to all 
four of you, I share your frustrations here. Because the 
purpose of this hearing is to try to understand more clearly 
what are the difficulties, what are the barriers that are being 
put up and how do we try to address through these Federal 
agencies those barriers.
    Senator Murkowski?
    Senator Murkowski. Thank you, Mr. Chairman. You point out 
not only does this provide for a level of much-needed economic 
development in an area that so desperately needs it, it is just 
patently clear that in this Country we have to figure out how 
we do more for ourself rather than relying on foreign countries 
for our energy sources. So if we can produce it through the oil 
there, through the Three Affiliated Tribes, if we can do it 
through the coal that is available through the alternatives 
that we know are available throughout all of Indian Country and 
up in Alaska, we know we can do more for ourselves.
    So yes, it is an incredible boon for economic development. 
But it is also providing for this Nation's energy needs in a 
way that is substantial.
    Ms. Kitka, I want to follow on your comments about the dire 
situation up north. In reading through this morning's press 
clips from back home, there is an article from the Fairbanks 
Daily News Miner, Fairbanks is our second largest city in the 
State, and the mayor of the borough there is requesting for a 
state of emergency from the State because of the high cost of 
energy within the city. Not that we count on our newspapers to 
always get the facts correct, but it provides in this morning's 
article that the average income for Fairbanks residents is 
about $27,000 a year. The average household is spending about 
$6,000 a year on fuel alone.
    That is on the road system, that is in our second largest 
community. And in our villages, I was talking with somebody 
just a couple of days ago, Al Akakit, he is paying over $7 a 
gallon for their fuel. So when you have to put fuel in the snow 
machine or the four-wheeler to go out hunting or put it in the 
boat to go out hunting or fishing, it makes it extremely 
difficult, not to mention what it costs to power communities 
that receive their power through diesel generation.
    So it is very real and it is very, very scary for a lot of 
Alaskans, many, many around our State.
    I wanted to ask Chairman Wells, you have mentioned that you 
have these overlapping layers in dealing with the bureaucracy. 
There was a House bill that was introduced several years ago 
that would have authorized the appointment of a Federal 
coordinator to kind of take all these decision-makers at the 
Federal, State and the tribal levels to facilitate an approval 
process. Do you think that something like this would help in 
your specific situation there at the Fort Berthold Reservation?
    Mr. Wells. Vice Chairman Murkowski, what I believe needed 
to have happen would be to prepare this current stuff. The last 
boon we had was in the late 1980s and early 1990s. It sort of 
died out toward thereabout in Fort Berthold, oil and gas 
exploration. Since then, a lot of the personnel have retired.
    I have to commend Mike Black, he is the acting area 
director for Bureau of Indian Affairs, in helping Fort 
Berthold. He has met with us time and time again. Outgoing 
Assistant Secretary Artman also has met with us twice on this 
issue. He is looking at getting a line item budget for nine 
staff to come to Fort Berthold. But it hasn't been approved 
yet.
    I support that proposal 110 percent. But if it doesn't get 
approved, then we are still doing temporary details in this 
major time of frustration for our tribal members. On Fort 
Berthold, when things don't go right, the tribal business 
council and the chairman get the brunt of the blame, criticism. 
Even though it is the Bureau of Indian Affairs, they are left 
scot-free. We are the ones who are catching the criticism. That 
is why we are here.
    Senator Murkowski. We clearly hear the frustration. Mr. 
Begay, I want to commend the Navajo Nation for pursuing the 
Dine Wind project and the transmission project. In your 
testimony, you've detailed several areas where you think that 
we can make some changes that would be helpful. You mentioned 
priority transmission access, somehow or other that Congress 
could employ some incentives to tribes to gain the priority 
access.
    Can you elaborate a little bit more on how we might be able 
to facilitate that?
    Mr. Begay. Regarding transmission access, the Navajo 
Transmission Project is a 500 kV, it is a high-voltage line 
that will carry power from Four Corners west and it will be 
used also as an economic opportunity to open up for Desert 
Rock. I think the key incentives there are the accelerated 
depreciation and with the renewable, whether it is wind or 
solar, I think there are production tax credits, the worker tax 
credits, I think those are the three that I mentioned.
    Senator Murkowski. The tax incentives.
    Mr. Begay. Yes, to continue so we can take advantage of 
them.
    Senator Murkowski. Julie, you mentioned several of the 
bigger projects that are out there, the wind farm there on Fire 
Island. We know that we have some enormous potential. But we 
also know that there are some smaller-scale renewable energy 
projects that hold great promise. There are several sites on 
the Yukon River, on the Kuskokwim River, on the Koyakuk, where 
employing some pilots to gain energy from the river currents 
there, we are looking at how we might be able to trap the 
methane gases that are out on the tundra. We have wonderful 
geothermal potential we are looking at out in the Naknik area 
up in Nome, outside of Pilgrim Hot Springs there.
    But we all know that these are projects that are going to 
be years in delivering renewable and hopefully more affordable 
sources. You have asked us for assistance in the short term. 
Outside of conservation, which of course is something that we 
need to better in this Country, but outside of conservation, 
what is your suggestion for the first thing that we could do to 
make an impact for the local, remote communities where we could 
see a difference in prices?
    Ms. Kitka. I think what you are talking about is a shortage 
of cash and families that don't have much cash. I think the 
first thing you ought to do is you ought to increase the money 
that goes to Small and Needy Tribes program, and the Tribal 
Priority Allocation program in the Department of Interior and 
get additional flexible resources out to the tribes that are 
the smallest and have the highest rates of poverty and need. 
Getting that additional cash flowing in those communities by 
the tribes that they can help fill the gap, they know their 
community members, they know who is having the hardest time, 
they know which families are supporting larger groups of people 
on that. Get some immediate additional resources into them so 
that there is more cash flowing in the communities.
    Again, I think the biggest thing the Congress can do is 
change the whole investment climate for energy resources. 
Unless the investment climate is incentivized for people to 
invest in these alternative energies at the smallest community 
levels, people are going to look for other economic 
opportunities where they can get greater returns, and so 
additional tax credits, grant programs, the whole thing, that 
is crucially important.
    But we also need more cash into the communities immediately 
before the hunting and fishing seasons are over, so that people 
can get out there and get their food for the winter.
    Senator Murkowski. Thank you. I appreciate it, Mr. 
Chairman.
    The Chairman. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman. I have a couple of 
questions.
    This is for Chairman Wells to start out. From where I sit, 
the delays in leasing approval would be easy to put on manpower 
deficiencies, is that what you see it as, or is it something 
more than that?
    Mr. Wells. I believe so. Being a former realty specialist 
with the Bureau of Indian Affairs, in the 1980s, the retirement 
process within the system and then the new oil and gas 
exploration was brand new. Those royalty specialists didn't 
experience that out at Fort Berthold for 20 years. And just the 
processes, the problem I had though, was it doesn't matter. 
That is not an excuse. Same CFR, same job description, same 
full-time employee, they should have been prepared to cover the 
onslaught of business that came in the door.
    Senator Tester. No doubt about that.
    Chairman Venne, could you tell me what the BLM does to get 
$4,000? You said it costs $4,000 to punch a hole in Indian 
Country and $100 off the reservation. What does the BLM do for 
the $4,000?
    Mr. Venne. The $4,000 is to cover their administrative 
costs for the process of the paperwork. That is all it is. The 
law says BLM should collect that amount of money on public 
lands. I don't think tribes are public lands, and that is where 
we differ. But I think the law should be changed.
    Senator Tester. We have a piece of legislation called the 
Crow Indian Restoration Act, I believe that is it, the Crow 
Tribe Restoration Act. How important is that? How important is 
the passage of that piece of legislation to your energy 
development?
    Mr. Venne. Well, if you look at the problems in Interior, 
the three major problems, in order to get my tribe to become 
self-sufficient, first is to pass our water rights settlement 
with the Federal Government. The other is to take care of the 
fractionated interests with the Crow Land Restoration Act. 
Otherwise you have hundreds and sometimes thousands of people 
sign off on a simple lease. Plus the fact that the Bureau is 
going to be paying more and more and more, if the fractionated 
interest in Indian Country is not taken care of.
    So to take care of that, what do they do? They turn around 
and not fund the ALCOV [phonetically] for next year? If Cobell 
was passed that would make a big difference. But I didn't want 
to wait around, that is why I submitted this bill to be passed.
    Another thing is, put forward legislation to teach, to 
treat tribes as States for tax purposes and clarify Indian 
nations as the taxing authority in Indian Country. That is very 
important to us. We talked about extending tax credits for one 
year. If you are going into a coal mine or a power plant, it 
takes five to eight years to really get your foot on the 
ground. That is not enough time. You might want to do a ten 
year, but that is still only two years you have the credit. I 
would prefer somewhere, 15, at least 20 years, for tax credits. 
And that is very important also.
    But in order for my tribe to become self-sufficient, I need 
Crow Land Restoration Act passed, and I also need my water 
compact ratified by the Congress.
    Senator Tester. Thank you.
    Mr. Begay, you talked about Indian Energy RPS which is an 
interesting thought. Most of what you talked about that you are 
doing, it hasn't happened yet, right ? The power line is still 
int eh planning, correct?
    Mr. Begay. Yes. We have the EIS and we have revised a RCRA 
decision coming from BLM. So it is ready for construction.
    Senator Tester. What has the interest been in buying the 
power that you are proposing at this point in time, or had you 
got to that point?
    Mr. Begay. The power to----
    Senator Tester. The electrical energy.
    Mr. Begay. The electrical energy to put on the line? There 
is tremendous demand for that power.
    Senator Tester. All right. In Montana we have some problems 
with transmission. President Kitka, where are you in Alaska? 
When it comes to renewable energy in particular, we have some 
problems with transmission, getting remote areas to a place 
where you can distribute the juice. Do you guys, how are you 
guys set up for transmission when it comes to development of 
any kind of energy, but particularly wind energy?
    Ms. Kitka. I would like to give a written response back, 
because it varies depending on different parts of the State. As 
I described, the land mass is so big that we have different 
circumstances. We do have one Federal-State partnership called 
the Denali Commission and we do some work on inter-ties. So we 
will be glad to provide some written comments.
    Senator Tester. Sure.
    I am interested more globally where you guys are, because I 
know some of the States we have our best wind opportunity, 
transmission is a real problem. I know that is the case where 
we are.
    With that, I just want to thank everybody for testifying 
today. Chairman Venne?
    Mr. Venne. One suggestion I do have, we have Federal 
interstate highways throughout our State. We always have a 
problem getting right of ways, energy corridors. Right in the 
middle of the interstate could be turned into the right of way 
for your oil and gas or anything else. You might want to think 
about that.
    Senator Tester. That is a good point, distribution is a 
challenge. Thank you.
    Thank you all for being here.
    The Chairman. Senator Tester, thank you very much. I think 
what I am going to do is suggest to the Vice Chairman, we will 
talk about it, but what I would like to do is have a couple of 
our Committee staff make a couple of trips and sit down in some 
roundtable discussions in a couple of tribal areas to try to 
understand with the BIA, with the BLM and others and tribal 
members what is happening here, what can we do to streamline 
the process, where are the road blocks, what kinds of things 
can we do to see if we can move this along. I am talking now 
specifically about energy development, where permits are needed 
and where the BIA is critical in terms of timing.
    Chairman Wells?
    Mr. Wells. Chairman Dorgan and Committee, I just have to 
say this. If you came to Fort Berthold and drove from the 
south, from the west, from the north into my reservation, you 
are going to see a glow like you are driving into Williston, 
Minot, Dickinson, Bismarck. The glow is off the reservation of 
drilling rights, north of Parshall, west of New Town, south of 
Mandaree. Only one well today is on my reservation when we 
should be enjoying the same type of expedited oil and gas 
development that the State of North Dakota is providing to the 
fee property.
    But when you come into the trust property, this is all I 
have, after three long years of approving, with the tribe and 
the mineral owners leases, the Bureau's approval is what is 
holding up production, Senator.
    The Chairman. I appreciate that. I will work with Senator 
Murkowski and Senator Tester. We will see if we can put 
together, I want our staff to go out and sit down, do some 
roundtable discussions, try to figure out, where are the 
roadblocks here and how do we eliminate these roadblocks. 
Because it is unfair, if we have special roadblocks that exist 
on Indian reservations because the BIA is not moving or some 
other agency is not moving and you are required to get those 
permits and get the approvals before you can proceed.
    We appreciate very much the testimony of the four of you 
today. We have obviously heard from other tribes as well, but 
this will be a catalyst to try to have this Committee be more 
aggressive in working with these Federal agencies. We 
appreciate all four of you being here.
    I will next call the other panel to the witness table. The 
second panel that will be with us today is Dr. Robert 
Middleton, Director of the Office of Indian Energy and Economic 
Development, the Office of the Assistant Secretary at the 
Department of the Interior. Mr. Steven Morello, Deputy 
Assistant Secretary, Intergovernmental and External Affairs, 
the Director of the Office of Indian Energy Policy and 
Programs, in the U.S. Department of Energy.
    Dr. Middleton and Mr. Morello, thank you both for being 
with us. You heard some of the testimony that has been given 
this morning. We hope that in your testimony you might be able 
to respond to some of that as well as provide the testimony 
that you have arrived with.
    Let me start with you, Dr. Middleton. You are the Director 
of the Office of Indian Energy and Economic Development in the 
Office of the Assistant Secretary. Why don't you proceed? Your 
entire statement will be made a part of the record, I say that 
to both of you, and you may summarize. You may proceed.

        STATEMENT OF DR. ROBERT W. MIDDLETON, DIRECTOR, 
OFFICE OF INDIAN ENERGY AND ECONOMIC DEVELOPMENT, OFFICE OF THE 
  ASSISTANT SECRETARY, INDIAN AFFAIRS, U.S. DEPARTMENT OF THE 
                            INTERIOR

    Mr. Middleton. Thank you, Mr. Chairman. Good morning, Mr. 
Chairman, Vice Chairman Murkowski and Senator Tester. My name 
is Bob Middleton, Director of the Office of Indian Energy and 
Economic Development.
    Thank you for the opportunity to present testimony today 
concerning potential economic development opportunities 
available for American Indian and Alaska Native communities 
through energy resource development. The Department believes 
that responsible development of tribal energy resources is 
critical to the economic viability of many American Indian 
tribes and to the sustainability of many Alaska Native 
villages. Energy development represents a near-term solution 
for many tribes to promote social and economic development, 
small business and job creation, and to the advantage of their 
tribal members.
    The U.S. Department of Interior assists tribes and Indian 
individuals in managing approximately 56 million acres of land 
throughout Indian Country. In consultation with tribes, the 
Department has assisted in the exploration and development of 
2.1 million acres of these lands, and with the potential of 
developing another 15 million acres for potential energy and 
mineral resources.
    Also, the Department was given responsibility for 
promulgating and implementing the regulations for Tribal Energy 
Resource Agreements, as authorized under Title V of the Energy 
Policy Act of 2005. These regulations were published in final 
form on March 10, 2008 and became effective on April 9, 2008. 
Use of these TERAs could provide significant flexibility for 
tribes that choose to develop their energy resources for 
economic purposes.
    Since the passage of the Energy Policy Act of 2005, my 
office, the Office of Indian Energy and Economic Development, 
has been working diligently to promulgate the regulations and 
implement its provisions. We work closely with tribes and 
tribal representatives to ensure all the provisions could be 
developed into a process that would be workable and effective 
for all parties. While it is too early to see what the total 
effect of the regulations will have on Indian Country, we 
believe that a TERA will be a significant tool for tribes that 
would like to have more control over energy development 
decisions on tribal trust lands.
    Several tribes have expressed interest in pursuing a TERA 
and just this week, on Tuesday, we held a national meeting in 
Denver to discuss the regulations that have been put into 
place, our expectations for a Tribal Energy Resource Agreement 
to be presented by the tribes and the process with which we 
will then process these applications to the Secretary to take 
on a decision-making responsibility for energy development on 
tribal trust lands.
    A TERA really provides an alternative to those tribes that 
seek to use their energy resources to build tribal economies. 
At the same time, it enhances their self-governing capability 
to control the pace and extent of development. While tribes 
have successfully used the provisions of the Indian Mineral 
Leasing Act as well as the Indian Mineral Development Act, 
these mechanisms and processes are not fully consistent with 
self-determination and self-governance, because the Secretary 
is still required to evaluate and approve each energy 
development project negotiated between a tribe and a third 
party. A TERA would authorize tribes to take on this decision-
making responsibility.
    There are also two other provisions of Title V that my 
office is implementing. First, we are soliciting proposals for 
capacity-building grants that will allow tribes to build their 
internal skills needed to regulate, evaluate and monitor their 
energy development activities. I wish I could say that my 
office was efficient enough to have planned this, but in fact, 
that announcement is being published in the Federal Register 
today. We are making available $1 million to tribes to be able 
to train their tribal members to be able to start taking on the 
responsibilities of these management decisions.
    This is only the second year for this type of funding. Last 
year we were able to issue $400,000 in grants to several 
tribes. Over time, these technical assistance grants will allow 
many interested tribes to develop the capacity to maximize the 
benefits of entering into a TERA with the Secretary.
    Second, we are developing a web-based clearinghouse of 
environmental information. This will be available to all tribes 
whether they enter into a TERA agreement or not. The intent of 
this clearinghouse would be to allow easy access to 
environmental reviews, environmental impact statements and 
other documents pertinent to energy resource development. We 
will also be developing individual environmental analysis 
modules specific to energy projects such as wind, geothermal, 
oil, gas, coal.
    The web portal will also provide tribes access to experts 
on environmental analysis, energy development and natural 
resource protection. As the program matures, it will be an 
invaluable opportunity for tribes to grow their own energy, 
environmental and management experts and to self-manage energy 
development under tribal trust lands. This will allow tribes to 
capture significantly more of the value chain that results from 
energy development on reservations.
    As you pointed out, Mr. Chairman, energy development 
provides some significant economic opportunities on Indian 
land. In 2007, energy and mineral resources generated $475 
million in royalty revenue paid to Indian individuals and 
tribes. Since 2002, the annual income from energy and mineral 
production increased by more than 113 percent. This trend is 
expected to continue for the foreseeable future.
    However, economic potential of future energy and mineral 
resources in Indian land has enormous possibilities. We 
estimate the lands contain over 5 billion barrels of oil, 37 
trillion cubic feet of natural gas and 53 billion tons of coal 
that are technically recoverable with current technologies.
    In addition, the potential for renewable energy resource 
development is high. Many tribal lands are well situated to 
take advantage of a range of renewable energy resources. 
However, just because an area has a significant solar, wind, 
biomass or geothermal resource does not always mean that the 
resource development is economically viable.
    As Julie Kitka also mentioned, Alaska has a unique energy 
situation. While rising energy costs certainly present problems 
for those of us who live in the lower 48, the consequences of 
Alaska Native communities, which are mostly rural, are 
alarming. Energy crisis impacts rural Alaska on both the 
individual and community level. When communities spend more on 
fuel, they spend less on key services. Many residents of rural 
Alaska often have to make decisions regarding heating their 
homes, putting fuel in their vehicles and feeding their 
families. Presented with these options and in the face of the 
current upward trend of energy prices, it has been reported 
that many rural residents are abandoning traditional lifestyles 
for more urban settings, thus devastating these longstanding, 
vibrant rural communities.
    In closing, I would like to say that energy development on 
tribal lands is not a new industry. Certainly, some tribes have 
a long history of working cooperatively with industry to use 
natural resource development as a stimulus for the economies. 
However, with the current high demand for both traditional and 
renewable energy sources and technologies, Native American 
communities are well-situated to use their natural resources to 
enhance local economies and help meet the U.S. need for energy.
    In addition, Native American communities and Alaska stand 
to benefit greatly from development of alternative energy 
sources as a hedge against ever-rising crude oil and natural 
gas prices. The Department believes that development of energy 
and mineral resources on Indian lands can help foster strong 
Indian communities with sustainable economic development by 
promoting and supporting the creation of jobs, capital 
investment, Indian-owned business and a trained workforce.
    Thank you for the opportunity to present before the 
Committee and I will be prepared to take questions.
    [The prepared statement of Mr. Middleton follows:]

  Prepared Statement of Dr. Robert W. Middleton, Director, Office of 
    Indian Energy and Economic Development, Office of the Assistant 
                              Secretary, 
            Indian Affairs, U.S. Department of the Interior
    Good morning, Mr. Chairman and Members of the Committee. My name is 
Bob Middleton, and I am Director of the Office of Indian Energy and 
Economic Development (IEED) at the Department of the Interior. Thank 
you for the opportunity to present testimony today concerning the 
potential economic development opportunities available for American 
Indian and Alaska Native communities through energy resource 
development.
    The Department believes that responsible development of tribal 
energy resources is critical to the economic viability of many American 
Indian tribes, and to the sustainability of many Alaska Native 
villages. Energy and mineral development represents a near-term 
solution for many tribes to promote economic development, small 
business, and job creation for their tribal members.
Overview
    The U.S. Department of the Interior holds in trust, and assists 
tribes and Indian individuals in managing, approximately 56 million 
acres of land throughout Indian Country. In consultation with tribes, 
the Department has assisted tribes and allottees in the exploration and 
development of 2.1 million acres of active and 15 million acres of 
potential energy and mineral resources. This activity includes 
collection of exploratory data and identification of energy resources, 
funding of and assisting in feasibility studies, market analyses and 
other resource development initiatives, as well as overseeing leases 
and agreements for oil, natural gas, coal and industrial mineral 
deposits located on Indian lands.
    The Department is responsible for developing, implementing and 
reviewing bureau-wide policies, plans, processes, environmental impact 
studies, industry leasing and development activities, and other 
functions related to development and production of energy and mineral 
resources on Indian lands. We provide advice and data concerning 
geotechnical, economic, and land-use issues to Tribes and Indian 
landowners who are seeking to manage and develop their energy and 
mineral resources. We also provide assistance in negotiating beneficial 
working agreements with developers, and guidance through the often 
complex and time-consuming regulatory approval process.
    Also, the Department was given the responsibility for promulgating 
and implementing the regulations for Tribal Energy Resource Agreements 
(TERA), as authorized under Title V of the Energy Policy Act of 2005. 
These regulations were published in final form on March 10, 2008 and 
became effective on April 9, 2008. Use of these TERAs could provide 
significant flexibility for tribes that choose to develop their energy 
resources for economic purposes.
Implementation of Title V
    Since the passage of the Energy Policy Act of 2005, and the 
included Title V, titled the Indian Tribal Energy Development and Self-
Determination Act of 2005, IEED has been working diligently to 
promulgate regulations to implement its provisions. We worked closely 
with tribes and tribal representatives to assure all of the provisions 
could be developed into a process that would be workable and effective 
for all parties. As I mentioned these regulations became final less 
than 1 month ago on April 9, 2008.
    While it is too early to see what total effect these regulations 
will have in Indian country, we believe that a TERA will be a 
significant tool for tribes that would like to have more control over 
energy development decisions on tribal trust land. Several tribes have 
expressed interest in pursuing a TERA with the Department and on April 
29, 2008, we held a national meeting in Denver with tribes that were 
interested in learning more about the final regulations and TERA 
development procedures. We provided tribes and the public with an 
overview of the TERA regulations that explained the processes and 
requirements for applying for and obtaining approval for a TERA and 
subsequent requirements for future monitoring and review of a tribe's 
activities under a TERA.
    There are several tribes that are already major players in domestic 
energy markets, and we assume would take advantage of the additional 
flexibility of a TERA. In addition, there are many tribes that have 
less expertise in the energy development area but have significant 
energy resources and have indicated a desire to manage energy 
development projects on their tribal trust lands.
    A TERA provides an alternative to those tribes that seek to use 
their energy resources to build their tribal economies and at the same 
time enhance their self-governing capability to control the pace and 
extent of development.
    A TERA is an agreement between an Indian tribe and the Secretary of 
the Interior. Some of the concepts important to tribes included in 
Title V are:

   It is a transfer of authority, giving a tribe discretion to 
        evaluate and manage energy-related business agreements or 
        leases, or grant rights-of-way for pipelines, electric 
        transmission and distribution lines without the Secretary's 
        further review and approval.

   It only governs leases, business agreements, and rights-of-
        way related to energy resource development on tribal trust 
        land.

   It provides enhanced self-determination and economic 
        development opportunities for tribes by promoting tribal 
        oversight and management of energy resource development on 
        tribal land and providing Indian tribes an alternative to the 
        Indian Mineral Development Act and the Indian Mineral Leasing 
        Act.

   A TERA may include renewable and non-renewable energy 
        resources.

   It may include all or part of a tribe's land that is 
        restricted from alienation and some or all of the potential 
        energy resources.

   Tribes may also assume related administrative and regulatory 
        activities.

   A TERA can be amended to assume additional activities or to 
        reduce the scope of the TERA.

   It may also include existing leases, business agreements, 
        and rights-of-way that fall within the scope of the TERA.

    While tribes have successfully used the provisions of the Indian 
Mineral Development Act and the Indian Mineral Leasing Act and the 
Department has implemented their regulatory responsibilities with a nod 
toward providing the maximum flexibility possible to tribes, these 
mechanisms and processes are not fully consistent with the self-
determination and self-governance philosophy because, regardless of the 
level of technical, administrative or regulatory expertise of the tribe 
or its business partners, the Secretary is still required to evaluate 
and approve each energy development project negotiated between a tribe 
and a third party. A TERA would authorize tribes to take on this 
decision-making responsibility.
    There are also two other provisions of Title V that IEED is 
implementing. First, we are soliciting proposals for capacity building 
grants that will allow tribes to build their internal skills needed to 
regulate, evaluate, and monitor their energy development activities. A 
Federal Register notice will be published this month announcing the 
availability of approximately $1 million in grants that will be 
available to tribes for this effort. This is only the second year of 
this type of funding. Last year we were able to issue $400,000 in 
grants to several tribes. Over time, these technical assistance grants 
will allow many interested tribes to develop the capacity to maximize 
the benefits of entering into a TERA with the Secretary.
    Second, we are developing a third-party web-based clearinghouse of 
environmental information that will be available to all tribes whether 
they have a TERA or not. The intent of this clearinghouse would be to 
allow easy access to environmental reviews, Environmental Impact 
Statements, Environmental Assessments, and other documents pertinent to 
energy resource development. We will also be developing individual 
environmental analysis modules specific to various energy project 
developments such as wind, oil and natural gas, coal, transmission, and 
electrical generation. The web portal will also provide tribes access 
to experts on environmental analysis, energy development, and natural 
resource protection who will be available to provide technical 
assistance to individual tribes.
    As this program matures, it will be an invaluable opportunity for 
tribes to grow their own energy, environmental, and management experts 
to self-manage energy development on their tribal trust land. This will 
also allow tribes to capture significantly more of the value chain that 
results from energy development on reservations.
Energy Production and Income
    Oil and natural gas production in Indian Country has been 
significant and has even greater future potential.
    To date, more than 2 million acres of Indian lands have already 
been leased for oil and natural gas development. These lands account 
for about 10 percent of the oil and natural gas production from 
federally regulated onshore acreage. Based upon the latest data 
available from the Minerals Management Service, production of energy 
mineral resources generated $475 million in royalty revenue paid to 
Indian individuals and tribes in 2007. Since 2002, annual income from 
energy mineral production increased by more than 113 percent and this 
trend is expected to continue for the foreseeable future.
    However, the economic potential of future energy and mineral 
resources in Indian land has enormous possibilities. We estimate that 
an additional 15 million acres of undeveloped energy and mineral 
resources may exist on individual Indian and tribal lands, which if 
fully developed could result in billions of dollars in revenue for 
those tribes and individual Indian landowners over the period of 
production. Drawing from the results of various studies done over the 
years, we estimate that these lands contain over 5 billion barrels of 
oil, 37 trillion cubic feet of natural gas, and 53 billion tons of coal 
that are technically recoverable with current technologies.
    As tribes and development companies create more sophisticated 
energy and mineral development agreements under the Indian Mineral 
Development Act, comprehensive energy and mineral information is 
required to understand, evaluate and negotiate these agreements. By 
having a more thorough understanding of the geo-technical data and 
economic information, tribes can confidently enter into complex 
agreements knowing they have a sound economic and business arrangement. 
In addition, if a tribe wants to take advantage of the opportunity to 
develop Tribal Energy Resource Agreements with the Department, we must 
ensure that the tribe has identified resources and land title 
information, and the technical and administrative capability to develop 
those resources.
    Although historically energy production on Indian lands meant 
production from oil, natural gas, and coal, there is also significant 
potential for renewable resource development.
Renewable Resource Development
    The potential for renewable energy resource development in Indian 
Country is high. However, although many of these renewable energy 
resources are becoming more desirable to tribes, the amount of 
production from renewable resources has been limited by some external 
factors.
    Many Tribal lands located contiguous with the lower 48 States are 
well situated to take advantage of a range of renewable energy 
resources. However, just because an area has a significant solar, wind, 
biomass, or geothermal resource does not always mean that resource 
development--even with tax incentives or renewable energy portfolios--
is economically viable. Other factors such as location of existing 
transmission lines and power generation stations, and distance to 
population centers affect the development prospects of these resources.
    Many Indian lands evidence some form of biomass energy potential, 
from woody biomass from forestlands, and bio-diesel and ethanol 
production from agricultural and silviculture waste, to the growing and 
use of energy crops. We have identified 118 reservations with a high 
potential for biomass production. In addition, tribes in Nevada, 
California, Oregon, North Dakota, and South Dakota, and Pueblos in New 
Mexico also have potential to tap geothermal energy resources and most 
of the Indian lands in the Southwest and Western United States present 
opportunities for solar energy development. We are working with several 
tribes to identify available renewable energy resources.
    I would like to use one of the most talked about and visible 
renewable energy resources-wind-as an example of how the Department is 
taking a proactive approach to assisting Tribes regarding these types 
of projects.
    Indian Country encompasses some of the premier wind regimes in the 
U.S. Based upon recent site-specific calculations by IEED, for every 1 
percent of acreage of tribal land within these wind regimes that are 
ultimately developed, an estimated 5.35 billion kWh per year, on 
average, may be generated using current technology. (Total U.S. 
electric generation from all sources in 2004 was 3,853 billion kWh).
    We analyzed all the trust lands according to measurable factors 
affecting the economics that would determine a tribe's ability to build 
a utility scale wind farm. This screening process criteria included, 
but was not limited to, a wind resource of class three or higher, a 
land base with the potential for at least 50 MW (assuming 50 acres/MW 
or 2,500 acres), distance to transmission lines, road access, and 
whether the Reservation/Trust Land is in a state with a Renewable 
Portfolio Standard that has not yet been met. There are currently 77 
Reservations that meet these criteria.
    Of the 77 Reservations, there are about 23 million acres with class 
three or higher wind potential. Although not all of this acreage will 
be developed, it does represent significant renewable energy potential 
in Indian Country.
    Based on this analysis we intend to develop an Indian Land Wind 
Atlas. The purpose of the Wind Atlas is to attract potential investors 
and developers for commercial-scale wind development projects on Indian 
lands. IEED will create a map for each Reservation that features 
publicly available wind data, transmission lines, and a digital 
elevation model, along with some general information about the tribe(s) 
as well as contact information. The Wind Atlas will serve as a 
marketing tool that can be displayed at conferences. Each of the 77 
Reservations will be offered the opportunity to be included in the 
Indian Land Wind Atlas.
    In addition, IEED has already provided direct assistance to 25 
tribes through funding or staff time with their wind projects. 
Currently seven Tribes are in the final stages of pursuing wind farm 
development, and a few others have been collecting data from anemometer 
towers and are close to approaching wind developers. The Blackfeet 
Reservation in Montana is currently in negotiations with a developer to 
pursue a wind farm. In South Dakota, we supported the efforts of 
Rosebud Sioux Reservation to construct a single 750 kilowatt turbine 
which is currently in operation. We are also providing economic 
analyses and technical assistance as they pursue a 30 MW wind farm.
    However, not all wind development is large-scale or intended for 
offsite use. IEED is providing support for construction of a 65 KW wind 
turbine at Pine Ridge Reservation to help provide power to the KILI 
radio station. I believe that more of these local, distributed 
generating opportunities need to be identified and supported. These are 
opportunities to decrease existing high-cost energy requirements while 
supporting the use of renewable energy.
Energy and Mineral Development Program
    In the last 25 years, Congress, through the Department of the 
Interior, has funded about $83 million in projects to assess and help 
develop energy and mineral resources information on Indian Trust lands. 
IEED is now at the stage of working with tribes and providing them the 
technical assistance they need to move to the development and job-
creation phase. We are further defining these resources by the use of 
detailed exploration, market studies, business plans, economic 
analysis, and lease negotiation that reflect the tribes economic, 
environmental and social needs. This is more proactive and useful to 
tribes to help them proceed with development and realization of 
economic benefits from their energy and mineral resources.
    Today, our major objective is sustainable resource development 
focusing on Indian employment and income to the Indian Mineral Owner. 
This goes further than resource assessment which is the identification 
of the quantity and quality of mineral resources. Our focus on resource 
development (vs. resource assessment) is far more proactive and useful 
to tribes as they can proceed to an informed decision-making process 
for their resources that provides a springboard to the development and 
realization of the potential economic benefits.
    We are providing tribes with access to state-of-the-art knowledge 
and geo-scientific based modern analysis of their energy and mineral 
resources to allow them to perform the following critical functions:

        a) strategic planning,
        b) formulation of economic and energy policies,
        c) evaluation of lands in the purview of the Federal 
        Government,
        d) development of sound environmental policies, and
        e) negotiation of sound Indian Mineral Development Act (IMDA) 
        agreements with energy and mineral industry developers.

    IEED also has accumulated a significant repository of industry-
confidential exploration data (e.g., seismic data, well data). We have 
been actively providing technical assistance to various tribes by 
purchasing, reprocessing and interpreting thousands of miles of 2D 
seismic data as well as hundreds of square miles of 3D data. These 
studies have identified numerous prospects, some of which are 
essentially ready to drill. Some of the prospects still require 
additional data collection and evaluation to more accurately identify 
exploratory and development targets. These evaluations yield prospects 
that enhance the marketability of Indian lands and results in better 
economic terms of an agreement.
    During the boom era of the late seventies and early eighties, there 
was a considerable amount of acquisition of 2D seismic data acquisition 
on certain reservations, such as Wind River, Fort Berthold and 
Jicarilla. As needed, we purchase seismic data on tribal land using 
program funds. However because of changes in the petroleum industry 
over the last two decades, ownership rights to seismic data have passed 
to ``seismic data brokers'' who license data for use only. Therefore 
although the data is from Trust land, in most cases neither we nor the 
tribe have ownership of the data under this arrangement.
    Based on the limited amount of seismic exploration on Indian lands 
discussed previously, most reservations in the western U.S. are lightly 
explored, especially with the newer technology 3D seismic data. 
However, many reservations are situated in sedimentary basins with 
proven oil and natural gas potential. Reservations are also currently 
surrounded by considerable industry activity, and therefore the 
probability is high that the oil and natural gas reserves that private 
industry is discovering just over the reservation boundary on Federal, 
State, or private, land will also be present on Indian lands.
Alaska Energy Situation
    Alaska Native villages have a unique energy situation. While rising 
energy costs certainly present problems for those of us who live in the 
lower 48, the consequences for Alaska Native communities, which are 
mostly rural, are alarming. The energy crisis impacts rural Alaska on 
both the individual and community level: when communities spend more on 
fuel, they spend less on key services. Many residents of rural Alaska 
often have to make difficult decisions regarding heating their homes, 
putting fuel in their vehicles, and feeding their families. Presented 
with these options, and in the face of the current upward trend of 
energy prices, it has been reported that many rural residents are 
abandoning traditional lifestyles for more urban settings thus 
devastating these longstanding vibrant rural communities.
    Diesel fuel driven generators provide a majority of electricity in 
rural Alaska, especially on the Aleutian Islands where power 
transmission lines are non-existent. Because nearly all rural native 
villages generate their electricity locally using diesel generators, it 
is a balancing act each year for these communities. Diesel in Alaska is 
expensive at any time, with reported prices of around $9 per gallon. 
Estimating how many gallons of diesel need to be stockpiled when it can 
be transported less expensively during the warmer months is an 
important decision. Order too much and a village has spent money it may 
need for other goods and services. But, order too little, and it 
quickly becomes very expensive to have diesel transported to the bush 
during the winter months, again spending money that may be needed for 
other things.
    The Institute of Social and Economic Research (ISER) at the 
University of Alaska Anchorage issued a report which estimates that 
rural households face utility costs that are 50 percent higher than in 
2000. Specifically, according to ISER, for a gallon of diesel fuel, 
prices have gone up 83 percent in rural communities from 2000 to 2006.
    IEED has been approached by numerous communities for support on 
geothermal projects. The State of Alaska has completed preliminary 
surface geology mapping at many of these communities and documented the 
geothermal resources that are present. We have supported the 
communities of Unalaska and Adak on the Aleutian Islands. Both 
communities are currently generating their electricity using diesel 
fuel.
    Geothermal prospecting basically involves finding an underground 
fracture system or swarm that can provide sufficient quantities of 
heat, steam and water. These three components are necessary for a 
successful project. To find a fracture system, and to significantly 
increase the success of the project, shallow seismic refraction studies 
are often done to locate the well and identify a drilling depth.
    Unalaska has nearby thermal vents spewing steam and would be an 
ideal candidate for potential steam generation. This summer, the 
community is barging a drilling rig into the area to drill a municipal 
water supply well. This rig could be also be utilized to drill 
geothermal wells in the region. The mobilization costs for bringing in 
equipment are extremely high so it would be prudent to drill multiple 
holes while the rig is available. Unalaska currently is the home to an 
active fishing fleet and cannery.
    Our second project area is on Adak Island, which formerly housed a 
large Department of Defense facility. The island's electrical 
generation facilities are powered by inefficient diesel powered 
generators to supply the electric needs of the 70 residents. There is a 
part-time cannery operation on the island supported by a small fishing 
fleet. In addition, the military left a 2.8 million gallon fuel supply 
tank that could potentially be used to fuel ships in the area and 
provide some job potential. The addition of geothermal generation would 
greatly reduce energy costs in the area. Numerous steam vents line the 
coast in the harbor near Adak. In addition, they have an extensive 
power line grid.
    At both of these communities, IEED proposes acquiring and 
processing seismic data in an effort to locate the ideal site for a rig 
to drill an exploration borehole to help identify the optimal site for 
a future power generation facility.
    We are also assessing potential wind projects that would enhance 
energy reliability for some villages. We are currently doing an 
assessment on the Pribilof Islands to determine the feasibility of 
developing a hybrid wind energy system.
Summary
    In closing, energy development on tribal lands is not a new 
industry. Certainly some tribes have a long history working 
cooperatively with industry to use natural resource development as a 
stimulus for their economies. However, with the current high demand for 
both traditional and renewable energy sources and technologies Native 
American communities contiguous with the lower 48 States are well 
situated to use their natural resources to enhance their local 
economies and meet the U.S. needs for energy. In addition, Native 
American communities in Alaska stand to benefit greatly from the 
development of alternative energy sources as a hedge against ever-
rising crude oil and natural gas prices.
    The Department believes that development of Indian energy and 
mineral resources can help foster strong Indian communities with 
sustainable economic development by promoting and supporting the 
creation of jobs, capital investment, Indian-owned businesses, and a 
trained workforce.
Attachment



































    The Chairman. Dr. Middleton, thank you very much.
    Next we will hear from Mr. Steven Morello, Deputy Assistant 
Secretary, Intergovernmental and External Affairs and Director, 
Office of Indian Energy Policy and Programs.

  STATEMENT OF STEVEN J. MORELLO, DEPUTY ASSISTANT SECRETARY, 
                INTERGOVERNMENTAL AND EXTERNAL 
 AFFAIRS; DIRECTOR, OFFICE OF INDIAN ENERGY POLICY AND PROGRAMS

    Mr. Morello. Good morning, Mr. Chairman, Madam Vice 
Chairman, Senator Tester. I am Steve Morello, the Deputy 
Assistant Secretary for Intergovernmental and External Affairs 
at the Department of Energy. I also carry the title of Director 
of the Office of Indian Energy Policy and Programs, and I am 
also a very proud member of the Sault Ste. Marie Tribe of 
Chippewa Indians.
    I would like to thank you for the opportunity to discuss 
the Department of Energy's implementation of the tribal 
provisions of the Energy Policy Act of 2005 this morning. The 
Department has long recognized the important role that American 
Indian, Alaska Native and Native Hawaiians play in the 
deployment of environmentally sound energy technology and 
renewable energy production. We look forward to continued 
successful relationships with tribal governments as we work 
together to meet the growing demand for affordable, clean, and 
reliable energy.
    The Department of Energy has taken several steps to 
implement the tribal provisions of Title V of the Energy Policy 
Act of 2005. In September 2007, Secretary Bodman named me to be 
the first director of that office. The office is part of the 
Office of Congressional and Intergovernmental Affairs. In 
addition, the Department has requested other funding that 
supports pre-existing tribal programs that continue the 
important mission of promoting opportunities for tribes to 
participate in the work of the Department of Energy's program 
offices.
    One tribal energy assistance program at the Department is 
the Tribal Energy Program within the Office of Energy 
Efficiency and Renewable Energy. This program offers financial 
and technical assistance to tribes through government to 
government partnerships that enable tribal leaders to power 
Indian reservations with clean, renewable energy, enhance 
education and training for tribal nations on various energy 
options and improve local tribal economies and the environment.
    To support this mission, DOE has issued two funding 
opportunity announcements for the deployment of renewable 
energy and energy efficiency in Indian Country. The hope is 
through the resulting projects, DOE's investment of $4.5 
million in Fiscal Year 2008 will reduce tribes' use of fossil 
fuel and enable economic development within these Native 
communities.
    In Fiscal Year 2009, the EERE tribal program will continue 
critical energy assessment and technical assistance activities. 
Also, the activities will include ongoing project/program 
management, training, internships, and technical assistance 
through the DOE laboratories.
    Another initiative is the Tribal Electrification study to 
support tribal acquisitions of energy as contemplated by Title 
V. DOE is commissioning this study in the Office of Electricity 
Delivery and Energy Reliability. This study is being conducted 
by the Chickasaw Nation with the goal of determining where the 
greatest needs for electrification exist on the reservation. 
Upon completion of the study, it will provide a road map of the 
next steps in this important matter.
    Section 503 of the Energy Policy Act, which added new 
provisions to Title XXVI of the Energy Policy Act of 1992, 
mandated a report on ``the use of Indian tribes of Federal 
power allocations of the Power Marketing Administration.'' This 
report was submitted to Congress in December of 2007.
    Another provision of interest to tribal governments is the 
tribal loan guarantee authorized under Title V of the Energy 
Policy Act. While DOE is not implementing Title V loan 
guarantees specifically at this time, tribal governments and 
entities are permitted to participate in the Title XVII 
solicitations issued by the Department's Loan Guarantee Office. 
The Title XVII program is designed for projects that employ 
advanced technologies that avoid, reduce or sequester air 
pollutants and man-made emissions of greenhouse gases.
    Under the Consolidated Appropriations Act of 2008, DOE has 
authority until September 30, 2009, to issue loan guarantees 
for qualified projects.
    Since I have come to office, I have tried to look for ways 
to involve tribes in programs that we have at the Department of 
Energy. One such program is the Department's Solar Decathlon, 
which was held in Washington, D.C. last fall. This event drew 
over 100,000 people to the National Mall, where zero-emissions 
solar powered homes showcased the ingenuity of college students 
who incorporated energy efficient measures and available 
technology. My office hosted a delegation of tribal leaders, 
tribal colleges and universities, administrators and Federal 
agency personnel. Together, we toured the homes. We were able 
to highlight available clean energy technologies and 
demonstrate the energy-saving potential and economic 
development opportunities. Some day, I hope to see a tribal 
college or university exhibiting one of their products on the 
Mall at this event.
    Finally, my office supports an important initiative, which 
was started by the White House Indian Affairs Executive Working 
Group. Working with several Federal agencies, we created an 
``Indian 101'' online training program to educate Federal 
Government employees on the unique status of Indian tribes and 
how their historical relationship with the Federal Government 
affects Government programs, responsibilities and initiatives. 
My office aims to promote this training for DOE employees at 
headquarters and across the complex as well as at other Federal 
agencies.
    This concludes my prepared statement. I would be pleased to 
answer any questions the Committee may have.
    [The prepared statement of Mr. Morello follows:]

 Prepared Statement of Steven J. Morello, Deputy Assistant Secretary, 
  Intergovernmental and External Affairs; Director, Office of Indian 
                       Energy Policy and Programs
    Chairman Dorgan, Vice Chairman Murkowski, and Members of the 
Committee, I am Steve Morello, Deputy Assistant Secretary for 
Intergovernmental and External Affairs, Director of the Office of 
Indian Energy Policy and Programs, and a proud citizen of the Sault Ste 
Marie Tribe of Chippewa Indians. I would like to thank you for the 
opportunity to discuss the Department of Energy's implementation of the 
tribal provisions in the Energy Policy Act of 2005.
    The Department has long recognized the important role that American 
Indian and Alaskan and Hawaiian Natives play in the development of 
environmentally sound energy technology and renewable energy 
production. We look forward to continued successful relationships with 
tribal governments as we work together to meet the growing demand for 
affordable, clean and reliable energy.
    The Department of Energy has taken several steps to implement the 
tribal provisions of Title V of the Energy Policy Act of 2005 (EPACT). 
In September 2007, Secretary Bodman named me to be the first Director 
of the Office of Indian Energy Policy and Programs. This Office was 
created in Title V of EPACT, Pub. L. 109-58, August 5, 2005.
    The Office is part of the Office of Congressional and 
Intergovernmental Affairs. In addition, the Department has requested 
other funding that supports preexisting tribal programs that continue 
the important mission of promoting opportunities for tribes to 
participate in the work of DOE's program offices.
    One tribal energy assistance program at the Department is the 
Tribal Energy Program within the Office of Energy Efficiency and 
Renewable Energy (EERE). This Program offers financial and technical 
assistance to tribes through government-to-government partnerships that 
enable tribal leaders to power Indian reservations with clean, 
renewable energy; enhance education and training for tribal nations on 
various energy options; and improve local tribal economies and the 
environment.
    To support this mission, DOE has issued two funding opportunity 
announcements for the deployment of renewable energy and energy 
efficiency in Indian Country. The hope is through the resulting 
projects DOE's investment of $4.5 million in FY 2008 will reduce 
tribes' use of fossil fuel and enable economic development within these 
Native communities.
    In FY 2009 the EERE tribal program will continue critical energy 
assessment and technical assistance activities. Also, the activities 
will include ongoing project/program management, training, internships, 
and technical assistance through DOE laboratories.
    Another initiative is a Tribal Electrification study to support 
tribal acquisitions of energy, as contemplated by Title V. DOE is 
commissioning this study in the Office of Electricity Delivery and 
Energy Reliability. This study is being conducted by the Chickasaw 
Nation with the goal of determining where the greatest needs for 
electrification exist on the reservation. Upon completion of this 
study, it will provide a road map of next steps in this important 
matter.
    Section 503 of EPACT, which added new provisions to Title XXVI of 
the Energy Policy Act of 1992, mandated a report on ``the use by Indian 
tribes of Federal power allocations of the power marketing 
administration (or power sold by the Southwestern Power Administration) 
to or for the benefit of Indian tribes in a service area of the power 
marketing administration.'' (EPACT used the singular ``power marketing 
administration'' although there are four such administrations.) This 
report was submitted to Congress in December 2007.
    Another provision of interest to tribal governments is the tribal 
loan guarantees authorized under Title V of EPACT. While DOE isn't 
implementing Title V loan guarantees at this time, tribal governments 
and entities are permitted to participate in Title XVII solicitations 
issued by the Department's Loan Guarantee Office. The Title XVII 
program is designed for projects that employ advanced technologies that 
avoid, reduce, or sequester air pollutants or anthropogenic (manmade) 
emissions of greenhouse gases. Under the Consolidated Appropriations 
Act for 2008, DOE has authority until September 30, 2009 to issue loan 
guarantees for qualified projects such as Uranium Enrichment, Coal 
Based Power, Advanced Coal Gasification, Renewables, and Electricity 
Delivery. It is anticipated that future solicitations will be 
forthcoming in the near future announcing the availability and methods 
of applying for loan guarantees.
    Last month, DOE announced plans to issue solicitations this summer 
for up to $38.5 billion for the most promising nuclear projects; 
efficiency, renewable energy and electricity infrastructure projects; 
and advanced fossil energy projects that avoid, reduce or sequester 
greenhouse gas emissions. This will mark the second and third rounds of 
solicitations for DOE's Loan Guarantee program, which encourages the 
development of advanced energy technologies and is an important step in 
spurring investment in clean energy projects.
    In my time as Director, I have focused on working with tribal 
governments and entities to create appropriate partnerships in energy 
development, and have traveled extensively throughout Indian country to 
do so.
    An example occurred last fall during the Department's Solar 
Decathlon in Washington, DC. This event drew over 100,000 people to the 
National Mall where zero-emissions solar powered homes showcased the 
ingenuity of college students who incorporated energy efficient 
measures and available technology. My office hosted a delegation of 
tribal leaders, Tribal College and Universities' (TCUs) administrators, 
and federal agency personnel, and together we toured the homes. We were 
able to highlight available clean energy technologies and demonstrate 
the energy saving potential and economic development opportunities. We 
hope that a TCU will compete for selection as a future Solar Decathlon 
team.
    My office has not only reached out to Indian Country and others, 
but we have worked internally as well through the DOE senior-level 
Tribal Steering Committee. The committee meets monthly to coordinate 
between and among the program offices about tribal energy issues that 
affect DOE. Through this committee, we can harness the resources of 
various program offices and successfully collaborate on issues of 
importance to Indian Country. As Director, I chair these meetings, and 
I find this group to be an important component in maximizing 
opportunities for the Indian Country.
    Additionally, my office supports an important initiative started by 
the White House Indian Affairs Executive Working Group. Working with 
several federal agencies, we created an ``Indian 101'' online training 
program to educate Federal Government employees on the unique status of 
Indian tribes, and how their historical relationship with the federal 
government affects government programs, responsibilities, and 
initiatives. My office aims to promote this training for DOE employees 
at headquarters and across the complex as well as at other federal 
agencies.
    We are confident that our current and future activities with tribes 
will assist us in delivering a balanced and diverse portfolio of 
solutions to address the urgent energy and environmental challenges 
facing our country today. We hope that more tribes will become our 
partners in accelerating the development of clean and renewable energy 
technologies to dramatically increase the amount of clean energy 
produced in the United States.
    This concludes my prepared statement and I would be pleased to 
answer any questions the Committee may have.

    The Chairman. Mr. Morello, thank you very much.
    I understand that Senator Murkowski has to be at the Energy 
Committee. Did you wish to make a comment, Senator Murkowski?
    Senator Murkowski. Thank you, Mr. Chairman, and thank you, 
gentlemen, for your testimony here this morning. Mr. Middleton, 
thank you for acknowledging that in Alaska, our situation is a 
little bit different with our Alaska Natives and the challenges 
we face. We recognize that across the Country energy issues are 
a challenge to families. But our situation with so many of our 
Alaska Natives in their villages is even further complicated. 
So I appreciate your recognition of that.
    Mr. Morello, I appreciate your visit to the State and the 
opportunity to see what we experience. I guess I would leave 
you with this, in your capacity as the Director of the Office 
of Indian Energy Policy. You have mentioned the loan guarantee 
program, other financial assistance programs that we have 
authorized through the Congress in the 2005 Energy Policy Act.
    I believe that if we were to do right by those and provide 
for the funding, we would see more tribes stepping up to help 
this Country develop their energy sources. I do hope that we 
can do more than just provide for the authorization, that we 
can take that next significant step, which is to provide for 
that level of funding in Title V. I would hope that you would 
advocate the funding of these very critical programs when you 
discuss with Secretary Bodman.
    It is one thing for us to say we are going to put them into 
law, it is another thing for us to put the muscle behind the 
action that we have made. So you hear the frustration and the 
concern coming from the tribes. They need some assistance, 
whether it is the technical assistance, whether it is the 
financial assistance. So if we do our job here in Congress, it 
is not just the authorization, it is making sure that we put 
the money behind it. So I would hope that you would take that 
message back.
    Mr. Morello. Yes, ma'am.
    Senator Murkowski. With that, Mr. Chairman, I appreciate 
the accommodation and I am sorry that I must excuse myself.
    The Chairman. Let me ask a couple of questions, then I will 
turn to Senator Tester. I am trying to understand the testimony 
that both of you have offered. And you represent the energy 
function for Native Americans, for tribes, that we have 
established in the Bureau of Indian Affairs and the Department 
of Energy. I am trying to reconcile what you have told me 
relative to what the tribal leaders and others have said to us 
and how this addresses their problems.
    Dr. Middleton, the Tribal Energy Resource Agreements, I 
think these can be unbelievably important to tribes. But the 
DOI's final regulations for the TERA program state the 
Secretary will not allow tribes to take over ``inherently 
Federal functions.'' This phrase is not explained in the 
regulations at all that I am aware of. Despite comments from 
Indian tribes, the final regulations do not define or list what 
is ``inherent Federal functions.''
    How does a tribe proceed without understanding how this 
Administration or some future administration will determine 
what is an inherently Federal function?
    Mr. Middleton. Yes, Mr. Chairman. From the perspective of 
my office, we believe there are certain inherent Federal 
functions that the Secretary's office needs to retain, such as 
putting a liability on the Federal Government. In other words, 
if in cases of where tribes may want to take over the 
collection of royalties from development on trust tribal lands, 
at some point there may be a need to do an order to pay. This 
is typically a function that the Minerals Management Service 
performs. We believe it still needs to be retained in the 
Secretary's office, to have that order to pay presented to a 
company from the Federal Government, who has the fiduciary 
trust responsibility still under Title V of the Energy Bill.
    Title V, of course, explicitly says that the trust 
responsibility shall remain with the Federal Government. 
Therefore, we believe that certain functions like that probably 
need to be retained by the Federal Government.
    However, we are very open and I have been directed by the 
highest levels of the Department to be as flexible as we can to 
turn over responsibilities for managing these energy resources 
on trust tribal lands to the tribes.
    The Chairman. Would it not be wise to outline what does 
this mean in the regulation itself? In the rulemaking process, 
you want to try to clarify, not confuse. If I were a tribal 
chairman trying to figure out what this means, it means nothing 
except a phrase and how someone at some point will interpret 
that phrase, which can either make this TERA workable or make 
it largely meaningless.
    Why is this not defined anywhere?
    Mr. Middleton. Mr. Chairman, we fully understand those 
concerns that have been raised. We have been in long-term 
discussions with tribes and representatives of tribes to try 
and delineate what these inherently Federal functions would be. 
To be honest, we haven't quite come to completion on our 
internal thought processes on that yet. We are in discussions 
with the Solicitor's office to try and determine what those 
functions would be.
    But we thought it would be beneficial to make sure we at 
least got the regulations published as we were then continuing 
to clarify what inherently Federal functions are, rather than 
holding up the regulations themselves. But we do intend on 
trying to provide some clarification in the future.
    The Chairman. You indicated you had been in long-term 
discussions, which always offers warning bells for me. If they 
have been long-term so far, this Act was passed three years 
ago. If they have been in discussions now for some while and 
you don't have it yet resolved, when will it be resolved, do 
you think?
    Mr. Middleton. At this stage, Mr. Chairman, I am unable to 
give you an exact date. But I would like to be able to respond 
to that in writing and see if we can come up with an exact 
date.
    The Chairman. Yes. Now, Mr. Middleton, you are the Office 
of Indian Energy and Economic Development. You heard the 
testimony, and I understand you are not involved in the issue 
of approving leases and so on. Yet, the title of your job is to 
try to make these things work. So your response to Chairman 
Wells, for example? How do you respond to what he is saying is 
happening on his reservation? Because that is your agency, it 
seems to me.
    Mr. Middleton. That is correct. We do provide a lot of 
technical assistance. To be honest, as Chairman Wells pointed 
out, there has been an erosion of technical capability for 
energy and mineral development in BIA as well as Indian Affairs 
in general. We are trying to rectify this situation. As I am 
able to, I am bringing on staff to be able to provide technical 
assistance.
    Once Secretary Artman realized that there in fact was a 
delay in processing these leases in Fort Berthold, he did 
immediately pull together resources from the Office of Trust 
Services as well as my office out in Denver, as well as some of 
the local and regional offices folks, to take them up to the 
agency and start processing leases.
    At the same time, it is not simply a paperwork exercise 
either. There is a fiduciary responsibility inherent there, so 
there has to be some due diligence and processing leases. I 
know that people are working diligently on this. The delay is 
not an intended delay but simply was a manpower and technical 
capability shortage that hopefully has been rectified. We will 
be quickly working on issuing the remainder of the leases.
    The Chairman. Is there a plan underway at this point? You 
say hopefully rectified. We want to determine whether it is 
rectified. Is there a plan underway to marshal resources so 
that we don't have a tribe out there that wants to be engaged 
in development but can't get leases approved because it goes 
through a bureaucratic funnel, the end of which is plugged?
    Mr. Middleton. Definitely. At least for Fort Berthold, 
there is a plan in place. There are people on the ground 
actually processing leases at this time. I believe from the 
experience that we have had at Fort Berthold, we would be 
prepared in other areas of Indian Country as we may experience 
some boons in energy and mineral development.
    The Chairman. Chairman Wells is here, so I don't mean this 
just to represent Fort Berthold, it is a problem for them right 
now, because they are right smack in the middle of the most 
aggressive oil activity in America. It applies also over to 
Montana. But this issue is an issue that we want to understand 
as it represents other tribal challenges as well.
    So I am going to ask that there be a roundtable discussion 
in a couple of places in the Country here, so that we can have 
our staff go out and understand who is doing what, or who is 
not doing what, even more importantly. You know and I know, 
having watched this and participated in the Federal Government 
for some while, that sometimes to subsume something in a 
Federal agency means you will never, ever see it again, because 
people will study it to death. I really worry about Federal 
agencies not performing.
    The BIA, I must tell you, does not have a great reputation 
in performing, and for lots of reasons. As I indicated earlier, 
I am very distressed that we are losing the Assistant Secretary 
now, he has been there a year, it was vacant two years, 
probably vacant another year and a half. It is unbelievable to 
me.
    So I want to have our staff work closely with you, Mr. 
Middleton, because we need to address these issues. Your title 
is Director of the Office of Indian Energy and Economic 
Development. So whether you are involved in leasing or not, the 
fact is, that umbrella includes all those activities for me. I 
appreciate your coming and testifying.
    I want to ask Mr. Morello a couple of questions. We passed 
the Indian Tribal Energy Development and Self-Determination Act 
in 2005. It took the Department of Energy until almost the end 
of 2007 to appoint a director. That was because, I think, the 
House Appropriations Subcommittee for Energy and Water included 
report language that directed the Department of Energy to hire 
a director. So that was a two-year delay.
    It also says, Mr. Morello, that the Director is empowered 
to establish programs to assist tribes in meeting energy 
education, research development, planning and management needs, 
to develop a program to support and implement research 
projects, tribes with opportunities to participate in carbon 
sequestration and so on. It appears to me from what I hear from 
you that you are coordinating a lot of things, but your 
blueprint and your opportunity in this law is much greater than 
that, than just being a coordinator.
    My understanding is that the request for funding is just to 
cover payroll, travel and overhead. Do you have grant requests, 
do you have funding for grants and other opportunities that you 
are going to reach out to tribes with?
    Mr. Morello. Mr. Chairman, there are a number of grant 
opportunities in the Department of Energy. But they are 
dispersed throughout the program offices. The reason that I 
haven't requested any funding specific to my office at this 
time is because the office has very specific duties set out in 
the statute. They are very large responsibilities, very large 
duties. It is a couple of things going on here.
    The first thing is, I happen to believe that most of the 
wisdom for doing this job the right way resides not necessarily 
in the Forrestal Building but in Indian Country. So I wanted to 
spend a significant amount of time traveling in Indian Country, 
listening to the wisdom of the tribes with regard to what they 
need, how they would like to see this handled and what are 
their expectations, what are their hopes and their dreams, what 
energy resources do they have, how do they want to develop 
them.
    So I have traveled extensively and I have listened and I 
have heard a number of things, I have met three of the four 
panelists this morning in my travels before I came here.
    The second part of that is that there are approximately 40 
different people throughout the Department of Energy which 
touch Indian Country in one way or another. So before I go in 
like a bull in a china closet and say, I am the Director and I 
want this one and I want that one and make it look like I am 
just a power grabber, I wanted to do it in a deliberate way to 
understand what the needs are in Indian Country and then to go 
back and talk to the Secretary and the various unders and 
assistant secretaries and say, this is why I have found. You 
asked me initially how we should organize this. Now, after I 
have been at it for a year or so, this is what the real issues 
are and this is my recommendation.
    The Chairman. Mr. Morello, I understand that. But I think 
again, because there was a vacancy for two years, and so now it 
is three years after the law was passed and you are still doing 
an inventory, and I don't criticize you for trying to go out 
and being involved in understanding the needs, it is an 
important thing to do, but I think we also need to understand 
what specific program opportunities, what specific tools and 
techniques are going to be used to really reach out and help 
tribes.
    I have to be at Senator Reid's office at 11:15 for a very 
important energy meeting, in fact. So I am going to depart. I 
am going to submit questions to both of you, and Senator 
Tester, if you will take this chair, Senator Tester has agreed 
to complete the hearing as Chair, and I know he has questions 
as well on behalf of what is happening in Montana. In many 
ways, we have very similar circumstances, because it is one 
field, the Bakken Shale field. Both of us are very interested, 
not just for our part of the Country, but for Indian economic 
and energy development across the Country.
    Senator Tester, thank you very much. I regret that I do 
have to leave, but I am going to be submitting questions to 
both of you.
    Mr. Middleton. Thank you, Mr. Chairman.
    Senator Tester. [Presiding] Thank you, Chairman Dorgan. I 
appreciate once again holding this hearing, and I appreciate 
the panelists.
    You fellows were both here to hear the first panel. You 
heard their testimony. Do you feel a sense of urgency in the 
jobs you guys hold to help move this along? Or do you see it as 
much more working through the bureaucracy and structure? Do you 
understand what I am saying? Do you feel a sense of urgency to 
move this forward?
    Mr. Middleton. Most definitely, Senator Tester. As a matter 
of fact, my office was specifically formed by Secretarial order 
in 2005. Because the Secretary of Interior, Secretary Norton at 
that time, understood that energy development and economic 
development in Indian Country was crucial to continued success. 
Since that time, I think we have established a very good track 
record with my office on working in Indian Country, both on 
energy and economic development. We are providing workforce 
training, guaranteed loan programs, business development, 
energy and mineral development and now implementation of Title 
V of the Energy Bill.
    So we definitely have that sense of urgency and we are 
working hard on it.
    Senator Tester. Mr. Morello?
    Mr. Morello. Senator, when I came to this job, I had to 
decide if I would stay in Washington and work through the 
organizational issues, or if I would go out into Indian 
Country, find out what the real issues are try and figure out 
how to do business so that we could get renewable and 
sustainable energy projects off the ground. I decided to go out 
into Indian Country, find out what the issues were and work 
very hard at getting those projects put together.
    I had the opportunity to address the Crow Nation when they 
were in town for their UCC signing ceremony, over in the Indian 
Treaty Room. One of the points that I make whenever I address 
Indian nations and I made on that particular day is that it is 
very important for tribes to understand that when they do these 
deals, particularly with regard to renewable energy, they take 
a significant equity position in the deal and not just become 
lessors of their land.
    That message obviously is taking hold in Indian Country and 
it is a message that resonates. When the tribes understand that 
they can take ownership, this is their land and these are their 
projects, they are much more likely to want to proceed with the 
project and get the project out of the ground.
    Two other things that we have done in understanding this 
urgency is, we took $4.5 million, which was available generally 
for studies, feasibility studies and what-not, under the 
guidance of Secretary Karsner, we have put out two bids on the 
street right now, which are currently open for the tribes to 
respond to, $2 million for the lower 48 tribes and $2.5 million 
for Alaska for the purposes of actually getting projects out of 
the ground. This is not further studies, these are tribes that 
have already done studies that are on the verge of starting a 
project and just need the seed money to get projects started.
    So that is an opportunity that we made available to tribes 
in a fairly quick fashion.
    Senator Tester. Okay. How do you explain--we have all day, 
by the way, I don't have a meeting with Senator Reid,
    [Laughter.]
    Senator Tester. How do you explain the fact that Chairman 
Wells talked about, when you derive on his reservation, there 
are lights all around it and there is one well in the middle of 
it?
    Mr. Middleton. Actually, historically, a lot of production 
has taken place on fee land, on public lands, surrounding 
reservations, State land as well. However, for various reasons, 
moving in and working on reservations just hasn't occurred at 
the same pace. We are trying to rectify these situations by 
marketing the resource availability, determining what those 
resources are so that companies understand what the risks would 
be coming in on Indian land to develop these resources. We 
think we are making significant headway now.
    Senator Tester. You have a field that has 3.65 billion 
barrels of oil that is being developed all the way around. What 
is the problem?
    Mr. Middleton. In many cases, the tribes themselves have to 
make a determination amongst their members whether they in fact 
want to develop these resources. Part of the delay has been in 
tribes working with the----
    Senator Tester. Do they need to put a resolution together 
to the BIA? What I heard today was these guys want to develop 
the resources. They can't get it done because of leasing or 
whatever. And then you had mentioned in an earlier question 
that there has been an erosion of technical assistance in the 
Department. At a time when we are in a war with Iraq, which I 
would argue is to get oil, we are eroding our own technical 
assistance in Indian Country to be able to get oil 
domestically. It doesn't make any sense.
    Mr. Middleton. Senator Tester, you are correct. Back when 
there was the original oil boom in the late 1980s, there was 
quite a bit of technical assistance available in Indian 
Affairs, petroleum engineers, petroleum geologist, 
geophysicists, mining engineers. But over time, the need for 
those technical staff decreased somewhat. So when people 
retired, they weren't filled, they were filled with other 
skills that were needed.
    However, we have been increasing our technical assistance 
over the last few years. From the inception of my office, which 
as I mentioned, was done by Secretarial order, we are 
attempting to rebuild at a time when it is needed all of these 
technical skills that are available for oil and gas 
development, as well as renewable energy development.
    Senator Tester. Okay. We have to do better.
    Mr. Morello, are you working with any tribes in Montana?
    Mr. Morello. I have received invitations to visit the 
tribes in Montana. I am planning to go there this summer. I 
have an invitation from the Crow Nation, from the Blackfoot 
Nation and I am looking very much forward to going there.
    Senator Tester. Okay. I look forward to your being there 
also, and I am sure that the individual tribes you are going to 
represent do, too.
    As Chairman Venne pointed out in his particular area, he 
lives in the fourth poorest county in the Nation. I don't want 
to lecture anybody about anything, to be honest with you. But I 
look forward to you going out to Crow Country or the Blackfeet 
or any of them, Fort Belknap, I don't care, any of them, and 
looking around and seeing what is going on.
    Because the truth is that there is a sense of urgency. 
There is a sense of urgency in Indian Country and there is a 
sense of urgency from my perspective and I know Senator Dorgan 
and Senator Murkowski's perspective also. Because we have to 
get some things done here. These folks don't want to be 
dependent on the Federal Government. They want to be self-
determining. They want to be able to set their own agenda, and 
this is the opportunity, $120 a barrel oil is an incredible 
opportunity. The fact that we have coal reserves in Montana, 
the best in the Nation, is an incredible opportunity for this 
State.
    All I ask you to do is this. And I am not implying this is 
the case, but all I am asking you to do is, both of you, you 
are in a position where you can make a difference, and a 
difference for the right reasons. You have people on the ground 
that want to make a difference for their people. All I ask you 
to do is, if the people above you are saying, whoa, whoa, whoa, 
we don't want you to proceed here, slow-walk the leases or 
whatever, I hope you ferret them out and bring them to the 
transparency of the public eye. Because I don't think the 
people in this Country would buy it. I don't think they would 
accept it for an excuse.
    So I wish you the very best in your positions. I want to 
tell you, I think they are very, very important positions. And 
I think that, I haven't seen the kind of energy development 
that Mr. Begay talked about, what they are planning in the 
southern part of this Country. I applaud those efforts.
    But we need to not give them, but give them the 
opportunity.
    Mr. Morello. I understand that.
    Senator Tester. If we give them the opportunity, they will 
maximize it and they will run with it and things will happen. 
And it will make this Country stronger all the way around. It 
will make Indian Country absolutely stronger. But it will make 
the whole Country stronger, too, so everybody benefits.
    I don't mean to lecture anybody. I just appreciate your 
being here. There is a tremendous opportunity here, there is a 
tremendous challenge and with that challenge comes success if 
we approach it from the right direction. I think, I want to 
tell you, the people that I know that are on the ground are 
working hard and they are trying to make it happen. As Chairman 
Venne said, we want to know how to own our own company, well, 
let's figure out how to make it happen, because they will make 
it a success if we allow them the opportunity.
    Thank you very much. With that, we will adjourn.
    [Whereupon, at 11:25 a.m., the Committee was adjourned.]
                            A P P E N D I X

Prepared Statement of Hon. Curtis R. Cesspooch, Chairman, Ute Tribe of 
                    the Uintah and Ouray Reservation
Introduction
    My name is Curtis R. Cesspooch and I am the Chairman of the Ute 
Indian Tribe (Ute Tribe) of the Uintah and Ouray Reservation located in 
northeastern Utah. Our headquarters are located in Ft. Duchesne, Utah. 
On behalf of the Ute Tribe, I want to thank Chairman Dorgan and Vice 
Chairman Murkowski for holding this important hearing on Indian energy 
development and affording me the opportunity to contribute this 
statement for the record.
    I would also like to commend the Chairman and Vice Chairman for 
their hard work and dedication on important matters such as the 
reauthorization of the Indian Health Care Improvement Act and the 
reauthorization of the Native American Housing Assistance and Self 
Determination Act. My Tribe and Tribes across the country very much 
appreciate your efforts to get these bills enacted this year.
Background and History of the Tribe
    The Uintah and Ouray Reservation is the second largest Indian 
reservation in the United States, totaling 4.5 million acres. The Tribe 
has 3,157 tribal members and its government is an effective provider of 
services though 60 separate tribal departments ranging from land, fish 
and wildlife management; housing; education; emergency medical 
services; public safety; and energy and minerals management.
    My Tribe has come a long way in developing a stable economy and a 
tribal government with sound management practices. As settlers migrated 
west and began to populate the Ute tribal areas, the United States 
government created the Uintah Valley Reservation in 1861 and removed 
the Ute Indian bands from their homelands to the barren lands of the 
Uintah basin. Starvation and disease significantly reduced our numbers 
yet the Tribe endured.
    Using revenues from its energy resources, my Tribe has become a 
major employer and engine for economic growth in eastern Utah with a 
diverse array of tribal businesses including a bowling alley, a super 
market, gas stations, a tribal feedlot, an information technology 
company, a manufacturing plant, and an oil and gas development company. 
Our governmental programs and tribal enterprises employ 450 people, 75 
percent of whom are members of the Tribe. Each year the Ute Tribe 
contributes millions of dollars to the surrounding towns and 
communities.
    Because Utah state law completely prohibits gaming of any sort, the 
Tribes in Utah may not legally conduct gaming activities on their 
lands. As a result, the Ute Tribe's primary source of income comes from 
oil and gas development. The Ute Tribe has an interest in Ute Energy 
LLC which is pursuing oil and natural gas development on 300,000 acres 
of our reservation. The Tribe now averages a daily production of 1,000 
barrels of oil per day and is in the process of opening an additional 
150,000 acres of mineral leases on the reservation with invested $80 
million in exploration.
Energy Development and Improved Tribal Economies
    There are three reasons this Committee and the Congress should 
focus on energy development in order to strengthen Indian economies and 
improve the standards of living of Indian people. These are (1) the 
economic potential of Indian energy; (2) a very favorable market for 
energy prices; and (3) the new Indian energy law passed in 2005 and now 
being implemented.
    In terms of the economic potential of Indian energy, geography 
alone suggests that Indian Tribes have at their disposal huge stores of 
renewable and non-renewable energy and resources. Close to 20 Indian 
Tribes are regarded by the Department of Interior to have ``High 
Potential'' for hydrocarbon development. These same estimates show 
enormous potential of Indian energy--both renewable and non-renewable--
to generate significant revenues to Tribes and job opportunities to 
their members.
    With the enactment in 2005 of the Indian Tribal Energy Development 
and Self Determination Act Indian Tribes now have available a tribal-
centric and pro-development energy law to aggressively develop their 
energy resources. Significantly, the new law emphasizes tribal 
decision-making and does not discriminate against any variety of energy 
resource an Indian Tribe might choose to develop.
    Last, the market conditions could not be more favorable. Current 
projections based on estimates conducted by the U.S. Government in 2001 
suggest hundreds of billions in revenues from renewable energy sources 
alone. See ``Oil, Gas and Coal Resources on Indian Lands'', Division of 
Energy Mineral Resources Management, U.S. Department of the Interior, 
Bureau of Indian Affairs, 2001.
The Ute Tribe's Experience With Energy Development
    Like all Indian Tribes, my Tribe has also survived the wide swings 
in federal Indian policy from termination and assimilation to the 
present policy of Indian self-determination. Under Indian self-
determination the Tribe has thrived and is improving its members' lives 
by responsibly developing its energy resources such as oil and gas, tar 
sands, and oil shale.
    In 2005 this Committee was instrumental in drafting and shepherding 
through Congress legislation that the President signed into law. This 
law is the Indian Tribal Energy Development and Self-Determination Act 
(Pub.L. 109-58) and I am happy to say that my Tribe played a 
significant role in developing the legislation as well as the recently-
issued Final Rule to implement the Act.
    Together with the enormous energy reserves in Indian communities 
and robust prices for energy, the new Indian energy law will assist 
those Indian tribes that are willing and able to become energy 
producers on regional and national scales.
    A Final Rule to implement the key provisions of the Act was 
recently issued by the Department of the Interior's Office of Indian 
Energy and Economic Development (OIEED). This Final Rule, together with 
capacity building grants and other assistance forthcoming from the 
OIEED, will set the stage for an ``energy takeoff'' in Indian 
communities that has never been witnessed before. The centerpiece of 
the new Act is authority to the Secretary of Interior to review and 
approve ``Tribal Energy Resource Agreements'' (``TERAs'') submitted by 
Tribes that will, in turn, enable the Tribes to negotiate energy 
leases, business agreements, and rights-of-way without the step of 
securing the approval of the Secretary. Participation in energy 
development through a TERA is entirely left to the discretion of the 
Tribe and if it wishes it may continue to operate under pre-2005 laws 
that require the Secretary to review and approve energy-related leases, 
business agreements, and rights-of-way between a Tribe and its private 
sector partner.
    In Fiscal Year 2008, Congress appropriated funding for the OIEED 
and its counterpart in the Department of Energy--the Office of Indian 
Energy Policy and Programs (OIEPP)--to begin implementation of the new 
Act. Again this year, Congress appears prepared to appropriate even 
greater levels of funding for the operation of these two offices. While 
private capital is more appropriate for the actual development of the 
energy projects, Federal funding is appropriate in this instance 
because there are very specific Federal functions involved, such as the 
review by the Secretary of TERAs submitted by a Tribe, that cannot be 
legally delegated to the Tribe or any other entity.
Tax Incentives and Indian Energy Development
    In 1993, Congress amended the Internal Revenue Code to add two 
incentives to attract and retain capital investment and jobs to Indian 
reservations. These incentives are an accelerated depreciation 
provision that allows Federal taxpayers (i.e. private entities) to 
achieve faster write-offs for equipment and infrastructure placed in 
service on Indian reservations, and a wage a health credit against 
income to those same taxpayers that hire qualified Indians on Indian 
reservations.
    The incentives were authorized for a period of 10 years (1993-2003) 
and since 2003 Congress has chosen to re-authorize them in one year 
increments as part of what has become an annual ``tax extenders'' bill.
    There are difficulties presented to business planners with these 
one-year extensions. Were the incentives to be extended over a 
significant period, e.g. 20-25 years, investors would be encouraged to 
invest in ventures on Indian land and hire Indians as employees. 
Because it requires significant equipment and related infrastructure, 
energy development is particularly susceptible to these incentives. In 
fact, in its March 11, 2005, analysis of the accelerated depreciation 
provision, the Joint Committee on Taxation stated that

        ``[t]he shorter recover periods can have the effect of 
        substantially decreasing the tax liability of a business. 
        However, the degree of benefit for each business varies based 
        on the particular nature and situation of the business. For 
        businesses engaged in activities that rely heavily on large 
        depreciable assets, such as those involved in power generation, 
        the shorter recovery periods could be very attractive.'' See 
        ``Description and Analysis of Certain Federal Tax Provisions 
        Expiring in 2005 and 2006.'' (March 11, 2005, JCX-12-05).
Conclusion
    There are good reasons why this Committee should continue to focus 
on energy issues as it has done in the past. The new Indian energy law 
stresses tribal decision-making, tribal authority and non-
discrimination in terms of renewable versus non-renewable development. 
In my mind that is the appropriate recipe for strengthening tribal 
governments and tribal economies and improving the standard of living 
of tribal members.
    Thank you again for the opportunity to share my thoughts with the 
Committee.
                                 ______
                                 
  Prepared Statement of Neal W. Foster, Board Member/Vice-President, 
                      Sitnasuak Native Corporation
    On behalf of the Sitnasuak Native Corporation in Nome, Alaska 
please distribute this written statement regarding energy development 
to all Committee Members. For the record my name is Neal W. Foster, and 
I am a board member and also vice-president of the corporation. 
Currently, we are working in partnership with our regional 
corporation--Bering Straits Native Corporation--to develop a wind farm 
on our native lands.
    On May 1, 2008 Julie Kitka (President of the Alaska Federation of 
Natives) testified before you on ``Regaining Self-Determination Over 
Reservation Resources'' at a oversight hearing on Indian Energy 
Development. Please consider this statement as support for the 
testimony and the recommendations given by Ms. Kitka.
    In particular we would like to emphasize the need for economic 
incentives. The wind farm that Sitnasuak intends to have constructed by 
the fall of this year will have eighteen wind turbines. The key to 
making the project feasible was through federal tax credits and the 
ability to depreciate 50 percent of the project. However, these two 
incentives are set to expire this year. This makes it difficult to 
justify further investment to expand the wind farm in the future.
    Ms. Kitka recommends that the Committee hold energy hearings in 
regional centers in Alaska this summer, and Sitnasuak supports this 
recommendation.
    If you have any questions please feel free to contact me. Thank 
you.
                                 ______
                                 
   Prepared Statement of Elouise Brown, President, Dooda Desert Rock 
                              Organization
















                                 ______
                                 
Prepared Statement of Hon. Michael E. Marchand, Chairman, Confederated 
                   Tribes of the Colville Reservation
    On behalf of the Confederated Tribes of the Colville Reservation 
(``Colville Tribe'' or the ``Tribe''), I appreciate the opportunity to 
provide to the Committee on Indian Affairs this statement on Indian 
energy development, a topic of great interest to the Tribe. The 
Colville Tribe is hopeful that Title V of the Energy Policy Act of 2005 
will soon be fully implemented and adequately funded to ensure that 
Indian tribes have sufficient support in developing their energy 
resources.
    Before discussing Title V, I would like to take this opportunity to 
provide some brief background on the Colville Tribe. Although now 
considered a single Indian tribe, the Confederated Tribes of the 
Colville Reservation is, as the name states, a confederation of twelve 
smaller aboriginal tribes and bands from all across eastern Washington 
State. The Colville Reservation encompasses approximately 1.4 million 
acres and is located in north central Washington State. The Colville 
Tribe has more than 9,300 enrolled members, making it one of the 
largest Indian tribes in the Pacific Northwest. About half of the 
Tribe's members live on or near the Colville Reservation.
The Office of Indian Energy and Economic Development
    As the Committee is aware, the Bureau of Indian Affairs' Indian 
energy programs are administered by the Office of Indian Energy and 
Economic Development (IEED). The Colville Tribe can attest from its 
productive experience with the IEED in recent years that the IEED 
brings much needed technical assistance and capacity building to Indian 
country and enables Indian tribes to maximize, leverage, and develop 
energy resources on tribal lands.
    The IEED provides Indian tribes with grants to assess energy 
resources on tribal lands, build capacity, conduct feasibility studies, 
and for other purposes. Since 2005, the Colville Tribe has received 
grants and technical assistance from the IEED that have allowed the 
Tribe to begin planning and development of a new cogeneration facility 
on the Colville Reservation that will utilize woody biomass and other 
renewable materials. The facility, which is still in the planning 
stages, would be a 16-20 megawatt cogeneration plant at Colville Indian 
Power & Veneer, the Tribe's plywood and power plant in Omak, 
Washington. The existing power plant, which is 70 years old, was 
designed to produce only steam for the plywood portion of the plant. 
The current plant can produce only 8-9 MW because of the limitations of 
the cooling tower.
    The Colville Reservation has an unemployment rate of nearly 28 
percent, whereas the unemployment rate for Okanogan County is more than 
13 percent. Once completed, a project of this size would create 
approximately 50 full-time jobs. The 15 jobs that would be created at 
the facility would benefit Okanogan County and the 35 secondary jobs 
that would be created supplying the woody biomass would benefit both 
Okanogan and Ferry Counties. In addition to the IEED grant that has 
furthered this project, the Colville Tribe has received substantial 
technical assistance from the IEED, particularly from the IEED staff in 
the Denver office.
    Another program administered by the IEED is the Tribal Energy 
Resource Agreement (TERA) program. Authorized under Title V, TERAs are 
agreements between Indian tribes and the Secretary of the Interior that 
are intended to maximize tribal oversight and management of energy 
resource development. Once the IEED determines that a tribe possesses 
the requisite management capacity and approves a TERA, the tribe can 
then engage in a variety of energy development activities under an 
entirely new, flexible mechanism for entering into energy-related 
business agreements with third parties. The BIA published its final 
rule implementing the TERA program on March 10, 2008, and numerous 
applications are expected. Again, the Tribe is hopeful that the IEED 
will be provided sufficient resources and support to allow Indian 
country to fully utilize this unique tool.
The Office of Indian Energy Policy and Programs
    As the Committee is aware, Title V authorizes a number of new 
programs and initiatives in the Department of Energy (DOE). Among these 
programs are the establishment of an Office of Indian Energy Policy and 
Programs (OIEPP), a grant and technical assistance program, and a 
guaranteed loan program. The Colville Tribe is encouraged that DOE 
hired a Director for the OIEPP in September 2007. The Tribe is 
concerned, however, that since enactment of Title V in 2005, DOE has 
not requested funding for the OIEEP or any of the other Indian-specific 
programs authorized by the Title V and has not otherwise taken any 
steps to implement those programs.
    The Colville Tribe looks forward to working with the Committee and 
the respective appropriations committees to ensure that the IEED and 
the Indian energy programs at DOE have the tools and resources they 
need to fully realize the potential of Title V.
    Thank you for the opportunity to provide this statement and for 
your consideration of these issues.
                                 ______
                                 
                                 
                                 
                                 ______
                                 
  Response to Written Questions Submitted by Hon. Byron L. Dorgan to 
                           Steven J. Morello






























   Response to Written Questions Submitted by Hon. Maria Cantwell to 
                           Steven J. Morello






                                 ______
                                 
 Written Questions Submitted by Hon. Byron L. Dorgan to Dr. Robert W. 
                              Middleton *
---------------------------------------------------------------------------
    * Response to written questions was not available at the time this 
hearing went to press.
---------------------------------------------------------------------------
    Question 1. I understand that the Department of Interior's (DOI) 
Minerals Management Service (MMS) is forming a committee to consider 
recommendations for revising the rule governing valuation of oil 
produced on Indian lands. I further understand that the proposed rule 
changes are to bring added certainty to oil valuations. Will DOI's 
Indian Energy and Economic Development office or the Bureau of Indian 
Affairs (BIA) be involved in that rule change? How will you or the BIA 
be involved? What factors make MMS uncertain about its existing oil 
valuations?

    Question 2. Does the DOI use a standard form for tribal or 
individual Indian mineral leases? Can a tribe or individual Indian 
include provisions in a lease that require mineral production within a 
certain period of time? Can a tribe or individual Indian develop their 
own lease?

    Question 3. DOI's final regulations for developing a Tribal Energy 
Resource Agreement leaves the phrase ``inherently federal function'' 
undefined. Has this phrase been clarified? If so, how? If not, please 
explain the process DOI has been using or will use to clarify this 
phrase. Please also state when you anticipate clarifying this phrase 
and in what form that clarification will be provided.

    Question 4. We continue to be advised of delays in the Bureau of 
Indian Affair's (BIA) approval of energy related lease documents. I 
understand that your office has a number of energy experts on staff. 
Can the expertise in your office be used to train or assist BIA staff 
who review and approve energy lease documents?

    Question 5. I understand that the Energy and Mineral Development 
Program Grants issued by your office have been very successful for 
tribes to gain expertise and start mineral development. I further 
understand that these grants are competitively awarded based on 
available funding and that competition for these grants is significant. 
How many tribes apply to this program and how large are the awarded 
grants? Do you have applications that are denied? Why are applications 
denied? How many applications are denied per year due to lack of 
funding?

    Question 6. In your testimony, you commented that the Secretary of 
Indian Affairs had recently committed additional staff resources to 
review and approve mineral leases on the Fort Berthold Reservation. 
Since your testimony we have been informed that the additional staff 
committed to this effort have served the time permitted under their 
``job details'' and are no longer working on leases at the Fort 
Berthold Reservation. What are the past and present BIA staffing levels 
for approving leases on the Fort Berthold Reservation? In this 
information, without naming the staff directly, please include the 
titles or positions for each staff person involved in the lease 
approval process. Please briefly describe the steps a typical lease 
takes from an initial advertisement of an auction to final approval--
not including environmental reviews of an application to drill. In the 
lease approval steps you describe, what staff positions are involved in 
each step and how many staff are currently available at Fort Berthold 
to perform these functions?

                                  
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