[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
                         TRIBAL DEVELOPMENT OF
                       ENERGY RESOURCES AND THE
                        CREATION OF ENERGY JOBS
                            ON INDIAN LANDS

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

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON INDIAN AND
                         ALASKA NATIVE AFFAIRS

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                         Friday, April 1, 2011

                               __________

                           Serial No. 112-16

                               __________

       Printed for the use of the Committee on Natural Resources



         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov
      



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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                   Rick Healy, Democrat Chief Counsel
                                 ------                                

            SUBCOMMITTEE ON INDIAN AND ALASKA NATIVE AFFAIRS

                        DON YOUNG, AK, Chairman
                 DAN BOREN, OK, Ranking Democrat Member

Tom McClintock, CA                   Dale E. Kildee, MI
Jeff Denham, CA                      Eni F.H. Faleomavaega, AS
Dan Benishek, MI                     Ben Ray Lujan, NM
Paul A. Gosar, AZ                    Colleen W. Hanabusa, HI
Raul R. Labrador, ID                 Edward J. Markey, MA, ex officio
Kristi L. Noem, SD
Doc Hastings, WA, ex officio


                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Friday, April 1, 2011............................     1

Statement of Members:
    Boren, Hon. Dan, a Representative in Congress from the State 
      of Oklahoma................................................     3
        Prepared statement of....................................     4
    Gosar, Hon. Paul A., a Representative in Congress from the 
      State of Arizona...........................................     6
        Prepared statement of....................................     6
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts, Prepared statement of..............    64
    Young, Hon. Don, the Representative in Congress for the State 
      of Alaska..................................................     1
        Prepared statement of....................................     2

Statement of Witnesses:
    Connolly, Michael L., President, Laguna Resources Services, 
      Inc........................................................    51
        Prepared statement of....................................    53
    Cuch, Irene, Member, Ute Tribal Business Committee, Ute Tribe 
      of the Uintah and Ouray Reservation........................    41
        Prepared statement of....................................    43
    Hall, Tex G., Chairman, Mandan, Hidatsa and Arikara Nation of 
      the Fort Berthold Reservation..............................    17
        Prepared statement of....................................    18
    McCaleb, Neal, Member, Chickasaw Nation, and Chairman of the 
      Board, Chickasaw Nation Industries.........................    48
        Prepared statement of....................................    49
    Russell, Scott, Secretary, Crow Nation's Executive Branch, 
      Crow Tribe of Montana......................................     8
        Prepared statement of....................................     9
    Shelly, Ben, President, Navajo Nation........................    25
        Prepared statement of....................................    27

Additional materials supplied:
    Arctic Slope Regional Corporation, Letter submitted for the 
      record.....................................................    63
    Berrey, Hon. John L., Chairman, Tribal Business Committee, 
      Quapaw Tribe of Oklahoma, Statement submitted for the 
      record by Congressman   Dan   Boren........................     5
                                     



 OVERSIGHT HEARING ON ``TRIBAL DEVELOPMENT OF ENERGY RESOURCES AND THE 
               CREATION OF ENERGY JOBS ON INDIAN LANDS.''

                              ----------                              


                         Friday, April 1, 2011

                     U.S. House of Representatives

            Subcommittee on Indian and Alaska Native Affairs

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 11:00 a.m. in 
Room 1324, Longworth House Office Building, Hon. Don Young 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Young, Denham, Gosar, Kildee, 
Faleomavaega, Pallone, Boren, Lujan, and Hanabusa.

   STATEMENT OF THE HONORABLE DON YOUNG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ALASKA

    Mr. Young. The Subcommittee will come to order. As you will 
notice, it is exactly 11 o'clock, and that is the way that I 
like to do things. There is a quorum because there are two 
Members here, Mr. Kildee and myself, and so the Subcommittee on 
Indian and Alaska Native Affairs has a meeting today to hear 
testimony on the issue of tribal development of energy 
resources and the creation of energy jobs on Indian lands.
    Under Committee Rule 4[f], opening statements are limited 
to the Chairman and Ranking Member, or his substitute, so that 
we can hear from our witnesses more quickly.
    However, I ask for unanimous consent to include any other 
Members' opening statements in the hearing record if submitted 
to the Clerk by the close of business today. Hearing no 
objection, so ordered.
    He is not here, but when Mr. Pallone comes in, I ask for 
unanimous consent that he be allowed to join us on the dais. 
All right. The purpose of the hearing today is to receive 
testimony from tribal leaders and members about obstacles that 
are delaying the development of energy and other resources on 
Indian lands.
    With 56 million acres of Indian lands in the lower 48 
States, and 44 million acres of Native corporate land in my 
State of Alaska, Native Americans have an enormous potential to 
contribute to the energy and security of this country.
    As many of our witnesses know, tribal lands are estimated 
to contain 10 percent of the Nation's conventional and 
renewable energy resources. This is likely an understatement 
because Federal geologists are typically very conservative in 
their assessment of energy resources.
    A case in point, when we opened up Prudhoe Bay, it was 
estimated that we had 7 billion barrels of oil, and we have 
pumped 17 billion barrels so far in the period of time that it 
was supposed to have gone dry.
    Over 15 million acres of Indian lands with energy resources 
have not been developed. For instance, the Crow Nation has an 
estimated 3 percent of the United States coal resources, 
exceeding 9 billion recoverable tons.
    As gas prices continue to soar and unemployment ranks high 
throughout Indian Country, we should continue to encourage and 
empower tribes to responsibly develop their energy resources.
    However, due to outdated and duplicative Federal 
regulations and laws, tribes often feel that the Federal 
Government has treated them unfairly when compared to State and 
local government.
    Regulatory obstacles such as the Bureau of Indian Affairs' 
approval of Rights of Way, the Bureau of Land Management's 
approval of Applications for Permits to Drill, and National 
Environmental Policy Act red tape are unjust to the tribes.
    These rules and policies often slow energy development and 
discourage businesses to invest in tribal lands. However, such 
laws as the Energy Policy Act of 2005 are a step in the right 
direction.
    More specifically, Title 5 of the Act recognizes the 
authority of tribal governments to negotiate their own leases. 
Unfortunately, no tribe has applied for this special authority 
and this Subcommittee will explore reasons why this measure has 
not been attractive to tribes.
    We need to ensure that Federal environmental laws do not 
impede energy development in Indian Country. I look forward to 
working with my colleagues on the Committee and tribes to 
identify unnecessary laws and regulations, and to write 
necessary regulations to allow tribes to pursue energy self-
determination. I now recognize the late Ranking Member.
    Mr. Boren. Thirty seconds.
    Mr. Young. In 30 seconds, you could run three 100-yard 
dashes.
    Mr. Boren. That is right. I did on the way over here.
    Mr. Young. Anyway, Mr. Ranking Member, Mr. Boren, you are 
recognized for an opening statement.
    [The prepared statement of Chairman Young follows:]

           Statement of The Honorable Don Young,, Chairman, 
            Subcommittee on Indian and Alaska Native Affairs

    The purpose of today's hearing is to receive testimony from tribal 
leaders and members about obstacles that are delaying the development 
of energy resources on Indian lands.
    With 56 million acres of Indian lands in the Lower 48 States and 44 
million acres of Native Corporation lands in my state of Alaska, Native 
Americans have enormous potential to contribute to the energy security 
of this country.
    As many of our witnesses know, tribal lands are estimated to 
contain ten percent of the nation's conventional and renewable energy 
resources.
    This is likely an understatement because federal geologists are 
typically very conservative in their assessments of energy resources.
    Over 15 million acres of Indian lands with energy resources have 
not been developed. For instance, the Crow Nation has an estimated 
three percent of the United States' coal resources--exceeding 9 billion 
recoverable tons.
    As gas prices continue to soar and unemployment remains high 
throughout Indian Country, we should continue to encourage and empower 
tribes to responsibly develop their energy resources.
    However, because of outdated or duplicative federal regulations and 
laws, tribes often feel that the federal government is treating them 
unfairly when compared to states and local governments.
    Regulatory obstacles such as the Bureau of Indian Affairs' approval 
of Rights of Way, the Bureau of Land Management's approval of 
Applications for Permit to Drill, and National Environmental Policy Act 
red tape are unjust to tribes.
    These rules and policies often slow energy development and 
discourage businesses to invest on tribal lands.
    However, laws such as the Energy Policy Act of 2005 are a step in 
the right direction. More specifically, Title 5 of the Act recognizes 
the authority of tribal governments to negotiate their own leases. 
Unfortunately, no tribe has applied for this special authority and this 
subcommittee will explore reasons why this measure has not been 
attractive to tribes.
    We need to ensure that federal environmental laws do not impede 
energy development in Indian Country. I look forward to working with my 
colleagues on the Committee and tribes to identify unnecessary laws and 
regulations, and to write necessary legislation to allow tribes to 
pursue energy self-determination.
                                 ______
                                 

   STATEMENT OF THE HONORABLE DAN BOREN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF OKLAHOMA

    Mr. Boren. Thank you, Mr. Chairman. First, I would like to 
welcome all the witnesses here today. Thank you for sharing 
with us your successes and your hardships in the development of 
energy resources and jobs in Indian Country.
    This issue has long been an oversight on the part of the 
Congress. I am pleased to be here today to explore how we can 
encourage tribal growth. I want to start by saying that thus 
far the Federal Government has missed opportunities that 
encourage Indian Country to invest in energy as a means to 
create jobs and create revenue.
    There is an immense amount of untapped potential here to 
better the lives of our tribal neighbors. By looking at gaming, 
we can see what tribes with access to fair financial incentives 
and opportunities for growth can accomplish.
    In Oklahoma, tribal enterprises are the third largest 
employer in our State. The revenue that tribes generate goes 
directly back into the system to improve education, health 
care, and the overall standard of living.
    According to President Shelly's testimony, the unemployment 
rate among the Navajo people is 48 percent. There is absolutely 
no reason why, with such rich natural resources, almost half of 
the Navajo people should be unemployed.
    It is our duty to develop the tools to encourage economic 
growth in a field that will benefit everyone, and that is 
energy development. We can do this by examining obstacles and 
creating solutions.
    If the bureaucratic red tape is too thick, how can we ease 
that burden? If the tax system is structured unfairly, what 
will create an even playing field? If the Federal Government 
overlooks the funding responsibilities, how in this time of 
economic accountability can we meet these needs? What can we do 
to include Indian Country in our movement to lessen our 
dependence on foreign oil?
    I am a proud supporter of both conventional and renewable 
energy opportunities. After investing in renewable resources, 
Oklahoma now harnesses a total of 1,130 megawatts of energy 
from wind farms. I am a sponsor of the NAT GAS Act, which 
provides incentives to significantly expand the infrastructure 
necessary to grow the market for natural gas-fueled vehicles.
    This bill has a specific provision to extend these 
incentives to Indian Country. Aside from financial incentives, 
we can help tribes by ensuring that they have access to proper 
training and education.
    A large part of the overall development process will be 
increasing the expertise to better handle the complexities of 
these energy projects. Tribes need access to top-of-the-line 
training facilities and educational programs, so that they 
cannot only develop energy resources, but also become leaders 
in the field.
    And finally I wanted to explore the environmental impact of 
expansion. As an avid outdoorsman, I understand the importance 
of our country's natural resources. I want to ensure that we 
act responsibly and grow sustainably.
    The EPA, within its jurisdiction, should regulate the 
industry to protect the environment, while allowing for maximum 
growth. Permits and paperwork are an inherent part of the 
process, but tribes on the basis of their tribal affiliation 
alone should have no more difficulty than the private sector.
    I know that the Administration is currently working with 
tribes to redefine regulations, and I applaud its efforts. I 
look forward to hearing from our panelists today and working 
with the Committee in the future on creating these much-needed 
opportunities.
    Again, I thank you for your participation. I also, Mr. 
Chairman, have some testimony from the Chairman of the Quapaw 
Nation, and with unanimous consent, I would like to enter that 
into the record.
    Mr. Young. Without objection, so ordered. I thank the 
gentlemen, Mr. Boren, for that statement.
    [The prepared statement of Mr. Boren follows:]

        Statement of The Honorable Dan Boren, a Representative 
                 in Congress from the State of Oklahoma

    Thank you Mr. Chairman.
    First I would like to welcome all of the witnesses here today. 
Thank you for sharing with us your successes and hardships in 
development of energy resources and jobs in Indian Country. This issue 
has long been an oversight on the part of Congress. I'm pleased to be 
here today to explore how we can encourage tribal growth.
    I want to start by saying that thus far, the federal government has 
missed opportunities that encourage Indian Country to invest in energy 
as a means to create jobs and generate revenue. There is an immense 
amount of untapped potential here to better the lives of our tribal 
neighbors.
    By looking at gaming, we can see what tribes, with access to fair 
financial incentive and the opportunity for growth, can accomplish. In 
Oklahoma, tribal enterprises are the third-largest employer in the 
state. The revenue tribes generate goes directly back into the system, 
improving education, health care, and the overall standard of living.
    According to President Shelly's testimony, the unemployment rate 
among the Navajo people is 48 percent. There is absolutely no reason 
why, with such rich natural resources, almost half the Navajo people 
should be unemployed.
    It is our duty to develop the tools to encourage economic growth in 
a field that will benefit everyone: energy development.
    We can do this by examining obstacles and creating solutions.
    If the bureaucratic red tape is too thick, how can we ease that 
burden? If the tax system is structured unfairly, what will create an 
even playing field? If the federal government overlooks the funding 
responsibilities, how, in this time of economic accountability, can we 
meet these needs? What can we do to include Indian Country in our 
movement to lessen dependence on foreign oil?
    I am a proud supporter of both conventional and renewable energy 
opportunities. After investing in renewable sources, Oklahoma now 
harness a total of 1,130 megawatts of energy from wind farms alone.
    I am a sponsor of the NAT GAS Act, which provides incentives to 
significantly expand the infrastructure necessary to grow the market 
for natural gas fueled vehicles.
    This bill has a specific provision to extend these incentives to 
Indian Country.
    Aside from financial incentives, we can help tribes by ensuring 
they have access to proper training and education. A large part of the 
overall developmental process will be increasing the expertise to 
better handle complexities of energy projects.
    Tribes need access to top-of-the-line training facilities and 
educational programs so that they cannot only develop energy resources, 
but become leaders in the field.
    Finally, I want to explore the environmental impact of expansion. 
As an avid outdoorsman, I understand the importance of our country's 
natural resources. I want to ensure that we act responsibly and grow 
sustainably. The EPA should, within its jurisdiction, regulate the 
industry to protect the environment while allowing for the maximum 
growth.
    Permits and paperwork are an inherent part of the process, but 
tribes, on the basis of their tribal affiliation alone, should have no 
more difficulty than the private sector.
    I know the administration is currently working with tribes to 
redefine regulations and I applaud its efforts. I look forward to 
hearing from our panelists today and working with the committee in the 
future on creating these much needed opportunities. Again, thank you 
for your participation today, and I yield the balance of my time.
                                 ______
                                 
    [The statement of the Quapaw Tribe of Oklahoma submitted 
for the record by Mr. Boren follows:]

  Statement submitted for the record by The Honorable John L. Berrey, 
     Chairman, Tribal Business Committee, Quapaw Tribe of Oklahoma 
                              (O-Gah-Pah)

    Chairman Young, Ranking Member Boren, and members of the 
Subcommittee, I am John Berrey and I am the Chairman of the Quapaw 
Tribe of Oklahoma (O-Gah-Pah).
    On behalf of the tribe, I submit the following statement and 
recommendations for your consideration.
    While the Quapaw Tribe is not an energy resource tribe, the tribe 
has considered a variety of energy development-related projects 
including a gas-fired electricity plant to be located on Quapaw lands. 
As a consumer of electricity and other energy resources and byproducts 
like home heating oil and gasoline, the Quapaw Tribe and its members 
have a strong interest in seeing that the United States do what is 
necessary to foster development of all American resources whether they 
are located on or off Indian reservations.
    I want to thank Chairman Young and Ranking Member Boren for holding 
this hearing because natural and energy resource development holds 
enormous potential to rehabilitate tribal economies and bring jobs and 
incomes to Indian people around the country.
    The U.S. Departments of Energy and Interior have inventoried both 
conventional and renewable energy resources owned by and available to 
Indian tribes and, if these resources were developed, literally 
trillions of dollars in revenues would flow to the tribes and their 
members.
    One need only look to the success of the Southern Ute Indian Tribe 
in Colorado, which in twenty years has gone from a passive royalty 
collector to a natural gas phenomenon generating 1% of all natural gas 
consumed by Americans.
    Despite the potential of Indian energy, the fact is that a maze of 
uneconomic and outdated Federal laws and regulations and new fees to 
drill for oil and gas, combined with the ability of states to tax 
energy projects on Indian lands, and near-limitless challenges to 
energy projects by environmental groups, significantly erodes the 
competitiveness of energy development on Indian lands when compared to 
projects on state and private lands.
    Last year we celebrated the 40th anniversary of President Nixon's 
Special Message to Congress on Indian Affairs in which he articulated 
Indian Self Determination as the best hope to strengthen tribal 
governments and rehabilitate tribal economies. Over four decades, 
Indian tribes have made enormous strides in practicing good governance 
and re-structuring their governmental systems. With this in mind, it is 
time for the Federal government to acknowledge these developments and 
to tailor Federal laws, regulations and policies so that Indian tribes, 
not Federal officials, make the decisions that will determine whether 
and under what circumstances tribal energy and other natural resources 
will be developed.
    In 2010, the U.S. Department of the Interior's Office of Indian 
Energy and Economic Development commissioned the Quapaw Tribe to draft 
the ``Indian Tribal Energy Development Primer'' to assist interested 
Indian tribes and potential partners with the fundamentals of devising, 
structuring and operating energy projects on Indian tribal lands. I 
commend that document to the Subcommittee as it continues its review of 
the challenges to Indian energy development.
    As the Subcommittee proceeds to identify and rectify the 
impediments to Indian tribal energy development, be assured you may 
call on the Quapaw Tribe to assist in these noble efforts.
    Thank you.
                                 ______
                                 
    Mr. Young.We will now hear from our first panel, Secretary 
Scott Russell, Chairman Tex Hall, and President Ben Shelly, but 
at this time I also recognize the gentleman from Arizona, Mr, 
Gosar, for the purpose of introducing the President of the 
Navajo Nation. Mr. Gosar.

  STATEMENT OF THE HONORABLE PAUL GOSAR, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Dr. Gosar. Thank you, Mr. Chairman, and thank you for 
inviting President Shelly of the Navajo Nation to testify 
during this important hearing on the obstacles that Indian 
tribes face in developing energy resources.
    I had the pleasure of visiting Window Rock, Arizona, the 
capital of the Navajo Nation, in January during my townhall 
tour. I was so warmly received by President Shelly and the 
members of the Navajo Council, and the community leaders who 
braved the freezing Window Rock cold, to meet with me and share 
with me their stories.
    I am so hopeful that President Shelly's administration will 
bring forth a new era of self-determination and economic 
development. I look forward to his continued leadership and 
welcome him to the Committee today.
    [The prepared statement of Mr. Gosar follows:]

        Statement of The Honorable Paul Gosar, a Representative 
                 in Congress from the State of Arizona

    Chairman Young and Ranking Member Boren, thank you for holding this 
important hearing today. Not only am I very glad to see my 
distinguished constituent, President Shelly of the Navajo Nation, but I 
couldn't be more in support of the idea of bringing tribal leaders to 
Washington to talk about the challenges they face in developing their 
energy resources. At a time when gas prices are over $4.00 a gallon in 
some areas of the country, crippling middle class families and 
deepening the recession, we must pursue an all of the above energy 
policy. It is essential for our national security, to create high 
paying American jobs, and to ease the pain for consumers under the 
pressure of rising prices. And I can think of few places where economic 
development is needed more than the Indian reservations. Most tribes in 
Arizona have unemployment rates approaching or exceeding 50%. 75% of 
homes in America that lack electricity are located on the Navajo 
reservation alone. In addition, many Navajo reservation homes lack 
basic amenities that we take for granted: 31% lack standard plumbing, 
28% do not have modern cooking facilities, 32% are without electricity, 
and 60% cannot even install a landline telephone.
    And ``all of the above'' energy policy cannot proceed without 
including Indian Country. Tribal lands are estimated to contain 10% of 
the nation's energy resources, both traditional and renewable. In 
speaking with my Native American constituents, it is clear to me that 
Indian Country stands ready to be part of the solution, tapping into 
coal, gas, oil, wind, and solar power right in their own backyard in 
order to provide state of the art, low cost energy to their neighboring 
communities and states.
    And yet, as we hold this hearing today, much of Indian Country's 
energy remains unused.
    I believe, and I think today's witnesses will agree, that the 
federal government is placing roadblocks all throughout tribal lands 
that are figuratively strangling the tribes, sticking projects in a 
bureaucratic sinkhole, some never to be seen again. The Indian energy 
sector is working with both hands tied behind their backs, as they face 
not only the federal roadblocks that the private sector does, but also 
need to tangle with BIA for funding and grants.
    In Arizona's First District, the Navajo Nation is working on three 
sites for utility-scaled wind generation development--but environmental 
mandates are holding up the projects. The Navajo Generating Station 
(NGS) provides over 500 high paying jobs worth $150 million to tribal 
members, and the power generated by NGS and delivered to the Central 
Arizona Project (CAP) provides 45% of Phoenix's water supply and over 
80% of Tucson's supply. Yet an EPA rule threatens to make it cost 
prohibitive to keep the plant operating.
    Desert Rock Energy Project is a clean coal plant, operated in 
conjunction with the Navajo Nation. Desert Rock stands ready to power a 
large Southwestern corridor from Tucson, Arizona all the way to Las 
Vegas. The EPA issued a permit in 2008, but yet rescinded the permit in 
2009. While Desert Rock waits for EPA to decide its fate, thousands of 
high paying construction and engineering jobs hang in the balance. We 
have seen far too much testimony, and far too much evidence, of the EPA 
imposing extreme demands that are not consistent with Congressional 
intent and serve only to delay, obstruct and hinder worthwhile 
projects.
    On the Navajo reservation alone, three sites are actively being 
explored by the tribal utility office for wind turbines, yet the Fish 
and Wildlife Service (FWS) has ignored the consensus of stakeholders 
and wrote a nonsensical, out of touch set of rules for wind turbine 
operations that is leaving these wind projects stagnant.
    These delays are not only devastating to Indian Country, and 
contrary to the promise we made decades ago to allow tribal self 
determination, but also part of a troubling pattern of Washington 
control over the West. I am so proud to live in a state with awe 
inspiring landmarks, beautiful forests, and abundant mineral supply--
yet so dismayed at the out of touch and uninformed bureaucrats who 
dictate to us how we are allowed to use these resources. We in the West 
know how to form community consensus around the best use of our wild 
lands and mineral resources, and only ask one thing of Washington in 
return: get out of the way and allow us to make these responsible 
decisions.
    Again, it is apparent to me that Indian Country stands ready to be 
part of the solution to our pressing energy crisis. The question is, do 
federal agencies stand ready to listen, to engage, to cooperate, and 
mainly to get out of the way of safe domestic energy production?
    Thank you. I look forward to the witnesses' testimony and answers.
                                 ______
                                 
    Mr. Lujan. Mr. Chairman?
    Mr. Young. Yes, sir?
    Mr. Lujan. If the gentleman would yield quickly.
    Dr. Gosar. I would be happy to.
    Mr. Lujan. And as well, Mr. Chairman, if it would be all 
right, I would like to welcome the President of the Navajo 
Nation, who is New Mexican, as well as Navajo, and Mr. 
Chairman, Ya'at'eeh, Shik'is, welcome. I look very forward to 
the testimony today and see how we can better work together to 
make sure that we are all more respectful to sovereignty and to 
our Tribal Nations. Thank you, Mr. Chairman.
    Mr. Young. I thank the gentleman. A great introduction. The 
witnesses' written testimony will appear in full in the hearing 
record, and so I will ask you to keep your oral statements to 
five minutes as outlined in our invitation letter to you, and 
under Committee Rule 4[a].
    So at this time, I will call, I believe, my first witness. 
Scott Russell will be the first one up. Mr. Scott Russell, 
Secretary of the Crow Tribe of Indians.

            STATEMENT OF SCOTT RUSSELL, SECRETARY, 
                  CROW TRIBE EXECUTIVE BRANCH

    Mr. Russell. Thank you, Mr. Chairman. I thank you for this 
opportunity to address this Committee. In 1868, the Crow 
Nation, with the Fort Laramie treaty, encompassed a reservation 
of 38 million acres. Through time, we have lost a majority of 
that reservation, and now we have 2.2 million acres.
    And under those 2.2 million acres now lies three percent of 
the United States' coal reserves. Coal is the primary source of 
income for our tribe. Two-thirds of our income comes from this. 
We have been in the coal game for 37 years.
    We have some problems that need to be addressed today. 
There are three different pieces of legislation that can be 
fixed. The Indian Coal Tax Production Credit; we ask for some 
form of a vehicle to make this permanent.
    When you are in the game of coal the market fluctuates so 
much that we need something secure so that we are able to plan 
and invest for the future. Right now if you look at the 
accelerated depreciation, you also have the employment tax 
credit. Those need to be incorporated in some form of 
legislation in the near future.
    For our Coal-to-Liquids project, we are looking at close to 
2,000 jobs. We are looking at making coal into jet fuel and 
diesel fuel. We are looking at 900 permanent jobs once this 
starts.
    Our reservation is similar to those of all reservations, 
which suffer from high unemployment rates. With this Coal-to-
Liquids project, we would be able to produce up to 50,000 
barrels of oil for clean jet and diesel fuel.
    With this, we would need your support in obtaining 
Department of Defense contracts so that we would be able to 
help our own. We also have an abundance of other resources, one 
of which is natural gas.
    But it is pretty hard for us to drill. We have to go 
through a process where there is an application for a permit to 
drill, and it is a travesty of the system. It started out with 
$4,000 in costs on it, but now it is up to $6,500 per test 
well.
    And I said it was a travesty to the system. If you walk one 
step off the reservation, it only costs a hundred dollars. We 
are set up for failure and with that, we need some legislation.
    Now, another process that hinders our productivity is the 
BIA process. You know, some of these permitting and the red 
tape that tribes have to go through could take years, and it is 
really hard for us.
    We also have renewable energy. For the Crow Tribe, we have 
monitors in place throughout our reservation, and it measures 
close to five and six classification, which is fairly good.
    A normal wind farm only needs 3 to 4 classification, and so 
we are sitting pretty good on that, and most recently, we just 
passed the Crow Water Rights Sullivan Act of 2010. In that 
there is a provision to provide money for a hydro facility on 
our reservation.
    We also have a dam there, the Yellowtail Dam. Fifty years 
ago, 5,500 acres of Crow land was condemned to build this dam, 
and it produces a half-a-billion kilowatt hours per year.
    Up to date the government has made 600 million dollars off 
this dam on our land, and we have not received any monies from 
that. We are at war right now, and in times of war, Native 
Americans are the highest percentage of any minority group in 
this country to enlist.
    We volunteer, and we fight side-by-side, and right now we 
are spending billions of dollars overseas in Iraq and 
Afghanistan. Most recently, we spent more billions of dollars 
bombing Libya.
    It is about time that some of those billions of dollars are 
returned to help economic development and help rebuild Native 
America. We are not here for a handout. We are here to partner 
with these United States and reduce our dependence on foreign 
oil.
    Mr. Chairman, I know that our time is very limited, but I 
wanted to bring up some of these points, and in my written 
testimony, it is more in-depth, but I really want to thank you 
for revitalizing this Committee. It is long overdue.
    Fifteen years is a long time, and for that, Mr. Chairman, 
and Members of the Committee, I thank you for this time.
    [The prepared statement of Mr. Russell follows:]

Statement of Scott Russell, Secretary, Crow Nation's Executive Branch, 
                         Crow Tribe of Montana

I. Introduction
    Good Morning Mr. Chairman and Members of the Natural Resources 
Committee. Thank you for the opportunity to share the views and 
concerns of the Crow Nation on Indian energy. The Crow Nation's energy 
resources are abundant and the financial stability of our Tribe is 
wholly dependent upon them. The Crow Nation is uniquely positioned to 
contribute to the energy independence of our country.
    We applaud this Committee's leadership in reviewing the vast energy 
opportunities in Indian Country and the economic value of such 
resources not only to the Tribes that own them, but to the nation as a 
whole. Eliminating obstacles to energy project development, along with 
providing incentives to create jobs in Indian Country to produce energy 
resources, will build additional national capacity to create even more 
jobs in the national economy. This is an opportunity that cannot be 
missed.
    In this testimony, I will describe the extent of the Crow Nation's 
coal, oil and natural gas, and wind energy resources and the existing 
and planned facilities and projects utilizing these resources. I will 
also discuss the obstacles to increasing the development of these 
resources and the solutions we propose to reduce the obstacles. With an 
estimated 3% of the nation's coal resources, as well as with 
preliminary estimates of significant oil, natural gas, and wind 
reserves, the Crow Nation is well positioned to provide the secure and 
dependable domestic energy resources that our national economy needs. 
And our energy resources will provide good jobs as we further develop 
them.

II. Crow Energy Resources
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% to its current 2.2 million acre area.
    In addition to this 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 from tribal ownership by 
1935). The Big Horn and Pryor Mountains were not allotted and still 
remain reserved for the Crow Nation and its citizens.
    According to more recent Bureau of Land Management Reports, the 
land statistics have shifted: 45% Crow allotments; 20% Crow Nation 
trust land; and 35% non-Indian fee land. In sum, the pattern of surface 
ownership generally is ``checkerboard'' with interspersed Crow Nation 
trust and fee lands, Crow allotments (held in trust for individual 
Tribal member owners), 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 nearly 13,000 enrolled citizens of the Crow 
Nation, with approximately 8,000 of those residing within the exterior 
boundaries of the Reservation. Additionally, a recent study indicates 
that the tribal population will exceed 20,000 citizens by 2015, which 
will add further stress to our fragile developing economy, and sharply 
increase the level of basic human services needed by our population. 
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 tribal members 
solid opportunities to hold stable and meaningful employment, homes, 
and educational opportunities. Our current unemployment rate is 47%. 
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 graduated over 300 students 
to date. LBHC graduates are employed on and around the Crow Reservation 
in a variety of positions including teachers' aides, 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 expanded job opportunities, including 
vocational-technical courses to support energy development.

Minerals, Past and Present
    The Crow Nation has an opportunity to develop tribal resources 
because the 1920 Crow Allotment Act, as amended in 1968, reserved all 
minerals, oil and gas on any lands allotted under that Act for the 
benefit of the entire tribe in perpetuity. Today, although some 
checkerboarding of mineral rights also exists on the Crow Reservation, 
subsurface mineral acres are owned primarily by the Crow Nation. For 
example, in the southeast corner of the Reservation, 1.3 billion tons 
of recoverable coal are wholly owned by the Nation. The larger portion 
of 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. 
Although the Crow Nation pursued some oil and gas development between 
the 1920s and 1950s, more recent natural gas development has been 
hampered by lack of pipeline infrastructure and the Federal Application 
for Permit to Drill (APD) fee. Most of our governmental revenue is 
derived from our 38-year relationship with Westmoreland Resources, Inc. 
Over that period, the Absaloka 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% of the nation's coal resource, exceeding 
9 billion recoverable tons. We have been exploring our oil and gas 
reserves, and preliminary estimates indicate that they are 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. The 
Nation is currently in talks with various companies regarding the 
development of these untapped resources, but barriers have slowed or 
prohibited significant progress.

III. Crow Energy Projects

A. Absaloka Mine
    The Absaloka Mine, owned and operated by Westmoreland Resources 
Inc. (WRI), is a 15,000-acre single pit surface coal mine complex 
located near Hardin, Montana and the Crow Indian Reservation. WRI mines 
coal leased from the Crow Nation pursuant to two different coal leases. 
The mine shipped its first coal in 1974, and has been a steady and 
reliable source of coal to its customers, and revenue to the Crow 
Nation for a continuous 37 year period. The Absaloka Mine was expressly 
developed to supply Powder River Basin coal to a group of Midwestern 
utilities, including Xcel Energy's Sherburne County Station near 
Minneapolis, Minnesota. The mine also enjoys a proximity advantage to 
these customers relative to its main competitors. Over the years, it 
has also sold coal to several other upper Midwest utilities as well. 
Coal is shipped via a 38-mile rail spur to the main line of the 
Burlington Northern Santa Fe Railroad near Hysham, Montana. WRI is 
currently evaluating a substantial investment in the construction of a 
westward bound railroad connection to facilitate coal transportation to 
explore west coast and export coal sales opportunities.
    The Absaloka Mine can produce up to approximately 7.5 million tons 
of coal annually, and has produced over 172.6 millions of tons over its 
life. WRI annually pays substantial production taxes and coal royalties 
to the Crow Nation; $9.9 million of taxes and $9.1 million of royalties 
were paid in 2010. These fees and taxes amounted to 23% of the gross 
revenue on the mine last year. These taxes and royalties are 
representative of the mine's financial contribution over the past 
several years. The significant portion of the Crow Nation's non-Federal 
revenues come from the Absaloka Mine. In 2010, these revenues accounted 
for approximately 40% of the Nation's non-Federal budget. WRI employs a 
variety of skilled, managerial, professional, and hourly employees, 
with an annual average salary of over $62,000 and a total annual 
employment expense of approximately $16 million dollars. The Absaloka 
Mine is the largest private employer of Crow Tribal members on a 
reservation that struggles with an unemployment rate that exceeds 47%. 
More than 70% of the mine's 163 member workforce consists of Crow 
Tribal members and affiliates. Without question, the Absaloka Mine is 
critical to the Crow Nation's financial independence now, over the past 
37 years, and well into the future.
    The Absaloka Mine continues to struggle financially with 
competition from the larger Powder River coal mines, and with the 
competitive advantage provided to Powder River coal through the impact 
of a price differential created by sulfur (SO2) emissions allowances 
under Title IV of the Clean Air Act. The competitiveness and the 
continued operation of the mine has been significantly facilitated by 
the tax benefits made possible by the Indian Coal Production Tax 
Credits (``the ICPTC'') included in the 2005 Energy Policy Act and 
beginning in 2006. The ICPTCs neutralized the coal price differential 
related to the SO2 emission allowances. Without the ICPTC, the Absaloka 
Mine would have ceased to operate, thereby ending a substantial revenue 
source for the Crow Nation. Continuance of the ICPTC is critical to the 
future of the Absaloka Mine and the stability of revenue to the Crow 
Nation.
    The Crow Nation is proud of its 37-year partnership with 
Westmoreland on the Absaloka Mine. The Crow Nation seeks to ensure the 
continued economic viability of the Absaloka Mine, as the Tribal 
revenue and jobs that it provides are an overriding imperative for the 
Nation and its citizens.

B. Many Stars CTL Project
    The Crow Nation has been working since 2008 to develop a very 
significant Coal-to-Liquids (CTL) project within the Crow Indian 
Reservation called the Many Stars CTL Project. The Project will consist 
of a new surface coal mine and a proven direct coal liquefaction 
process plant that sequesters CO2, uses less water and is 
more efficient than conventional indirect coal liquefaction projects 
operating in the world today. This clean-coal technology based project 
offers the best opportunity for the Crow Nation to monetize our 
currently stranded, lower-quality coal assets and is a critical 
economic necessity for the Nation. The CTL project will also provide a 
critically needed key domestic energy source to the United States and 
help reduce America's dependence on foreign oil.
    However, due to the recent economic downturn and investor concerns 
about future government policy towards CTL and uncertain permitting 
requirements to allow carbon sequestration, this project has been 
struggling to move forward. Even with the currently robust commodity 
market for transportation fuels, project risk due to historical 
uncertainties with such commodity markets is still a deterrent to 
investors.
    The Many Stars CTL Project will target conversion of up to 2 
billion tons of Crow coal over the life of the project, initially 
producing 6-8,000 barrels of liquid products per day and ultimately 
expanding to produce up to 50,000 barrels or more of liquid products 
per day. The Crow coal would be converted to ultra-clean fuels, such as 
synthetic jet fuel and diesel fuel at an estimated yield of 1.5 to 2 
barrels of liquid product per ton of coal. Thus, when considered in 
traditional oil and gas terms, this project has the opportunity to 
responsibly develop and monetize a world-class 3-4 billion barrel 
oilfield.
    For the Crow people, the success of the Many Stars Project is 
absolutely critical to end decades of poverty and create the long term 
economic viability of the Crow Nation. The first phase of the 
integrated surface mine and CTL plant will create up to 2,000 jobs 
during an initial three year construction period with the expectation 
that a significant portion of these jobs would continue as the plant is 
expanded during the subsequent 10-15 years. The number of permanent 
operations jobs is expected to grow from 250 to 900 upon the 
commencement of initial operations of both the mine and plant. The jobs 
created by this project would include high level positions, such as 
engineers and managers, as well as skilled trades (mechanics, 
electricians, welders). In addition, income generated by the project 
could serve to support the Nation's severely underfunded education and 
health care programs and support the development of key infrastructure 
on the Crow Reservation to improve the lives of its citizens.

C. Other Crow Coal Development
    For many years, members of the Crow Nation have watched a nearly 
continuous stream of unit trains cross the Reservation every day on the 
BNSF Railway, carrying someone else's coal to market. The Nation has 
active plans to develop several billion tons of ultra-low-sulfur coal 
located in the southeastern portion of the Reservation, for markets 
that the Absaloka Mine is not well-positioned to serve. These markets 
could include exports to Asia, which are currently constrained by port 
terminal capacity on the west coast, as well as difficulty in 
permitting new coal terminals generally.

D. Oil and gas Development
    During 2005-2008, the Crow Nation leased substantial areas of the 
Reservation for oil and gas exploration and development, using Indian 
Mineral Development Act agreements. Unfortunately, the independent oil 
and gas companies who leased these lands did not discover any 
conventional oil plays like the Bakken formation in northeastern 
Montana and North Dakota. Instead, the conventional oil exploration 
work under these agreements resulted in dry holes.
    This leasing activity did prove the existence of substantial 
shallow natural gas reserves on the Crow Reservation. In August, 2009, 
Ursa Major (an independent oil & gas company from Oklahoma) began 
delivering the first Tribal natural gas into the interstate pipeline 
system from the northeastern portion of the Reservation. Further full-
field development of Ursa Major's gas field has been slowed by low 
natural gas prices, coupled with the $6,500 per well APD fee charged by 
the BLM.
    Following the crash in oil prices and the credit markets in late-
2008, the industry's interest in leasing Crow oil and gas lands 
evaporated, and most development plans were suspended. Recently, we 
have begun to see some renewed interest, as evidenced by drilling plans 
for this year on a heavy oil prospect in the Pryor area on the western 
portion of the Reservation, but the $6500 APD fee currently in place 
reduces the interest of potential developers.
    The Nation will continue to pursue oil and gas development, knowing 
that there are substantial natural gas resources on the Reservation, 
trusting that the current heavy oil prospect will prove economic, and 
hoping that our luck will improve on locating other conventional oil 
resources.

E. Wind Energy
    The Crow Reservation encompasses areas with a significant potential 
for wind energy development. The Crow Nation has, with the assistance 
of the Division of Energy and Mineral Development through the 
Department of the Interior, compiled wind data for the past several 
years, which indicates a steady and reliable Class 5/6 wind resource in 
several areas of the Reservation. The most significant resource areas 
are also located in direct proximity to existing transmission lines, 
and are relatively easily accessible using existing paved highways and 
secondary roads. The wind resource areas encompass lands held in a 
variety of ownership patterns, including tribal trust, individual 
tribal member allotments (many of which are highly fractionated), and 
non-Indian fee lands.

F. Hydropower
    In 1958, the United States condemned over 5500 acres of Crow 
Reservation lands for building Yellowtail Dam. 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 few million dollars for the land taken to 
create Yellowtail Dam, the Crow Nation has never received any payment 
from the ongoing revenue from power generation.
    The recent Crow Water Rights Settlement Act of 2010 grants the 
Nation exclusive rights to develop and market hydropower from the 
Yellowtail Afterbay Dam (immediately downstream from the main Dam). 
Based on previous Bureau of Reclamation studies, the Yellowtail 
Afterbay should support the economic development of a small, low-head 
hydropower facility with an estimated capacity of 10-15 Megawatts. The 
Nation is currently commissioning a feasibility study to confirm that 
potential, and to evaluate transmission and marketing opportunities. 
Our study should be complete in a few months, and provide the necessary 
information to finance and construct the hydropower facility within the 
next two years.
    The Nation is considering using this hydropower production to 
supply the local rural cooperatives that provide electric power to the 
Reservation, to replace their current supplies of low-cost Federal 
hydropower which will no longer be available in a few years. It also 
appears that the Afterbay hydropower development could improve water 
quality in the blue-ribbon trout fishery on the Big Horn River.

IV. Obstacles to Continued Development of Crow Energy

A. Laws and BIA Procedures Impeding Energy Development.
    Despite the fact that the Crow Nation has substantial resources, 
numerous practical problems arise from the previously described 
history. The Crow Nation and our energy development partners have 
experienced, and continue to experience, systematic problems in trying 
to create energy development and the new jobs that would be associated 
with that development. The Bureau of Indian Affairs (``BIA'') 
consistently creates barriers and delays to resource development.
    For example, for an oil and gas lease approved by the Nation in 
January of 2005, development did not begin until September of 2007 
because of an extremely slow BIA approval process. Within the approval 
process of that lease, an inventory of Tribally-owed net mineral acres 
was reported as 94,000 acres. However, after the lessee expended large 
amounts of time and money reexamining mineral title information, an 
additional 50,000 net Tribal mineral acres was identified and 
confirmed. 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 often erroneous, 
missing and out of date. These problems cause significant delay in 
preparation of environmental documents and overall land records 
necessary for business transactions. The BIA lacks the necessary 
staffing to provide accurate information on Reservation surface and 
mineral ownership, and to resolve additional questions that arise. 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.
    Recent BIA procedures have made it increasingly difficult to carry 
out exploration programs for energy and other minerals on the 
Reservation. For example, coal exploration involves drilling core holes 
to verify the quantity and quality of coal, which take only a few days 
to drill, are accessed by existing undeveloped roads, and are fully 
reclaimed after completion. The BIA now requires full appraisals 
approved by the Office of the Special Trustee prior to obtaining 
consents from the allotted surface owners to drill the core holes and 
even to cross other allotments to reach the drill sites. These 
procedures, along with environmental assessments, result in long delays 
in exploration programs that could otherwise be completed in a matter 
of months.
    The obstacles posed by these procedures are even more prohibitive 
for other mineral exploration, such as bentonite, which require a large 
number of auger samples that have even less environmental impact and 
involve much smaller amounts of recoverable minerals.
    Finally, apart from the costs and delays caused by BIA staffing 
shortages and unnecessary procedures, laws that limit the duration of 
commercial leases on Tribal lands also impede development of large 
long-term projects such as the Many Stars CTL project. Many of these 
obstacles could be addressed by Congressional legislation such as the 
Indian Energy bill developed last year by the Senate Committee on 
Indian Affairs and introduced last session.

B. Inability to Plan on Continued Availability of Federal Income Tax 
        Incentives
    There are several current federal tax incentives for economic 
development in Indian Country, including an accelerated depreciation 
provision, an Indian wage tax credit, and the Indian Coal Production 
Tax Credit. However, the accelerated depreciation and wage tax credit 
both have substantial limitations that severely limit their usefulness 
for major Tribal energy development projects.
    More importantly, all of these tax incentives will expire again 
within the next 2 years, and in the past they have been extended only 
one year at a time. For major Tribal energy projects, such as a coal 
mine or a CTL project with 6-10 year development lead times, the 
inability to rely on the continued availability of these incentives 
means that they cannot be factored into the economic evaluations that 
are necessary for investment decisions.
    As further explained below, permanent extensions and appropriate 
modifications to these existing tax incentives would facilitate jobs 
and economic development, particularly energy development, on the Crow 
Reservation and for all of Indian Country.

C. The BLM ``APD Fee''
    Beginning with the FY 2008 Appropriations Act for the Department of 
the Interior, Congress required the Bureau of Land Management (``BLM'') 
to charge a $4,000 fee to process every Application for Permit to Drill 
(``APD'') on the federal and Indian lands on which it supervises oil 
and gas development activity. The APD Fee has since been increased by 
subsequent appropriations legislation to $6,500 for each new well. The 
Crow Nation has continually protested the application of this fee to 
tribal lands, and has sought relief in numerous ways, but to date, no 
solution has been reached.
    This $6,500 fee compares to drilling permit fees of less than $100 
off the Reservation in the State of Montana. Obviously, it is a 
disincentive to explore for oil and gas on Indian lands compared to 
off-reservation State and fee lands. As indicated above, it has been a 
major factor in the suspension of additional natural gas field 
exploration and development on the Crow Reservation by our partner, 
Ursa Major, who also holds leases outside the Reservation. The APD fee 
is a particular burden for the type of shallow (less than 1500' deep), 
low-producing gas wells being drilled by Ursa Major. The cost of 
completing those types of wells is less than $150,000 each, so the APD 
Fee represents a large portion of the capital investment necessary to 
bring additional wells into production.
    The APD Fee also discourages efficient development and slows 
exploration efforts. For exploratory ``wildcat'' drilling where success 
is not a sure thing, the developer can only afford to get permits for a 
couple of wells at a time, see if they hit gas, and if so, file APD's 
for a couple more and repeat the cycle. Without the high APD Fee, the 
developer would be able to obtain many permits and immediately drill 
additional wells if the first ones are successful. Considering the lead 
time for issuance of the drilling permits (60-90 days), the APD Fee 
causes delays of up to a year developing a handful of new wildcat 
wells, in addition to adding tens of thousands dollars of non-
productive costs that limit the Nation's ability to charge taxes and 
royalties on the future production.

V. Proposed Solutions

A. Federal Tax Incentive Legislation
        1.  Indian Coal Production Tax Credit

    The 2005 Energy Policy Act provided the Indian Coal Production Tax 
Credit beginning in tax year 2006, based upon the number of tons of 
Indian coal produced and sold to an unrelated party. ``Indian coal'' is 
coal produced from reserves owned by an Indian Tribe, or held in trust 
by the United States for the benefit of an Indian Tribe, as of June 14, 
2005. The tax credit is calculated by totaling the number of tons of 
Indian coal produced and sold, then multiplying that number by $1.50 
(for calendar years 2006 through 2010). For tax years between 2010 and 
December 31, 2012, the total number is multiplied by $2.00.
    The origin of this production tax credit began with the goal of 
neutralizing the impact of price differentials created by sulfur 
(SO2) emissions allowances, thereby keeping Indian coal 
competitive in the regional market. Without the credit, the Crow's 
Absaloka mine would have lost its supply contract and likely been 
closed in 2005, which would have had a devasting impact on the Nation 
given that this mine provides a significant portion of the Nation's 
government's operating budget. The tax credit has worked to keep the 
mine competitive and open. Now, in 2011, this tax credit remains 
critically important because, without it, the mine's economic viability 
would be in serious jeopardy. This tax credit remains critical to the 
current operation of the existing Absaloka Mine and provides sufficient 
incentive to help us attract additional investment for future energy 
projects. In order to protect existing operations and encourage growth, 
the Indian Coal Production Tax Credit should be made permanent, should 
be allowed to be used against alternative minimum tax, and the 
requirement that the coal be sold to an unrelated person should be 
deleted to allow and encourage facilities owned, in whole or in part, 
by Indian Nations to participate and benefit from the credit.

        2.  Accelerated Depreciation Allowance

    Included in the Omnibus Budget Reconciliation Act of 1993, Pub. L. 
103-66, 107 Stat. 558-63, codified at 26 U.S.C. 168(j), 38(b), and 
45(A), are two Indian reservation-based Federal tax incentives designed 
to increase investment and employment on Indian lands. The theory 
behind these incentives was that they would act in tandem to encourage 
private sector investment and economic activity on Indian lands across 
the United States. Neither incentive is available for gaming-related 
infrastructure or activities. The incentives--an accelerated 
depreciation allowance for ``qualified property'' placed in service on 
an Indian reservation and an Indian employment credit to employers that 
hire ``qualified employees''--expired on December 31, 2003, and have 
been included in the short-term ``extenders packages'' of expiring tax 
incentives since that time.
    Energy projects require significant equipment and physical 
infrastructure, and involve the hiring of large numbers of employees. 
Crow is not alone in our resource holdings; for several Indian nations, 
estimates of proven and undeveloped energy resources on Indian lands 
suggest that revenues to tribal owners would exceed tens of billions in 
current dollars. As the energy development market improves and the 
federal programs enacted in the 2005 pro-development energy law, the 
Indian Tribal Energy Development and Self Determination Act (Pub. L. 
109-58), energy-related activity on Indian lands will increase 
substantially in the years ahead.
    Unfortunately, one-year or two-year extensions of the accelerated-
depreciation provision do not provide an incentive for investment of 
new capital in Indian country for significant energy projects. 
Development of major projects generally takes a decade or longer. 
Investors need certainty that the benefit will be available when the 
project initiates operations in order to factor that benefit into their 
projected economic models, as well as investment decisions. A permanent 
extension would address this problem, making the incentive attractive 
to investors in long-term energy projects on Indian lands.
    As currently written, the depreciation allowance could be 
interpreted to exclude certain types of energy-related infrastructure 
related to energy resource production, generation, transportation, 
transmission, distribution and even carbon sequestration activities. We 
recommend that language be inserted to statutorily clarify that this 
type of physical infrastructure expressly qualifies for the accelerated 
depreciation provision. In proposing this clarification, it is not our 
objective to eliminate non-energy activities that might benefit from 
the depreciation allowance. Indeed, if adopted, the language we propose 
would not discourage other forms of economic development in Indian 
country.
    By providing this clarifying language and this permanent extension, 
the accelerated depreciation provision will finally accomplish its 
purpose--enhancing the ability of Indian nations to attract energy 
industry partners to develop long-term projects utilizing the vast 
Indian resources available.

        3.  Indian Employment Wage Credit

    The 1993 Act also included an ``Indian employment wage credit'' 
with a cap not to exceed 20 percent (20%) of the excess of qualified 
wages and health insurance costs that an employer pays or incurs. 
``Qualified employees'' are defined as enrolled members of an Indian 
tribe or the spouse of an enrolled member of an Indian tribe, where 
substantially all of the services performed during the period of 
employment are performed within an Indian reservation, and the 
principal residence of such employee while performing such services is 
on or near the reservation in which the services are to be performed. 
See 26 U.S.C. 45(c)(1)(A)-(C). The employee will not be treated as a 
``qualified employee'' if the total amount of annual employee 
compensation exceeds $35,000.
    As written, the wage tax credit is completely ineffective and does 
not attract private-sector investment in energy projects within Indian 
country. The provision is too complicated and private entities conclude 
that the cost and effort of calculating the credit outweighs any 
benefit that it may provide. We therefore propose that the wage and 
health credit be revised along the lines of the much-heralded Work 
Opportunity Tax Credit, which is less complicated and more likely to be 
used by the business community. We propose retaining the prohibition 
contained in the existing wage and health credit against terminating 
and rehiring an employee and propose to alter the definition of the 
term ``Indian Reservation'' to capture legitimate opportunities for 
employing tribal members who live on their reservations, even though 
the actual business activity may be off-reservation. This amendment 
would allow the Indian Employment Wage Credit to more effectively 
fulfill the purpose for which it was originally enacted.

B. Eliminate the BLM APD Fee on Indian Lands
    The current APD fee of $6500 is a hindrance to the Crow Nation's 
goal of developing its oil and gas resource. The disparity between the 
cost for drilling on tribal lands under federal jurisdiction versus 
lands under state jurisdiction prevents any meaningful economic 
development of the reserves existing on the Crow Reservation. The 
federal government should not, through its' trust responsibility, 
charge administrative fees that prohibit or render economically 
inefficient, the development of tribal trust assets. Indian lands 
should be exempted from BLM's APD fee.

C. Need for Government Support for the Many Stars CTL Project
    Several CTL projects have been announced in the U.S.; however, all 
of these projects are struggling due to the high financial commitment 
needed to plan and implement these projects in an uncertain economic 
and energy policy environment. Investors and banks are reticent to fund 
``first of a kind'' projects, even though the technology has been 
proven commercially in other countries and in demonstration plants here 
in the United States. As a comparison, China is moving forward rapidly 
in the CTL sector, with 12 sites already producing at commercial 
demonstration scale of 4-8,000 barrels per day with four commercial 
projects nearing start of construction at capacities up to 80,000 
barrels/day.
    Based on the foregoing, the following key actions are crucial for 
the viability of the Crow's Many Stars CTL Project:
          Grant the Department of Defense and other federal 
        agencies the ability to enter into long-term, guaranteed fixed-
        price contracts that will underpin the commercial framework 
        needed for these types of long-term CTL projects;
          Extend the expiration date of the current 50-cents 
        per gallon alternative fuel excise tax credit for a definitive 
        time period rather than year-to-year extensions as has been 
        done recently. Since it could take roughly 6-10 years for these 
        types of projects to become fully planned, implemented, and 
        operational, investors are concerned that the incentives will 
        expire before the plant starts up. Consider providing the tax 
        credit for a period of 10 years following start-up for those 
        projects starting construction prior to 2015.
          Support a twenty percent (20%) investment tax credit 
        for each CTL plant placed in service before the same future 
        date, and/or allow 100 percent (100%) expensing of investments 
        in the year of capital outlay for any CTL plant in operation by 
        the same future date.
          Support DOE and DOD alternative fuel development 
        programs as part of a comprehensive energy policy that supports 
        the full spectrum of energy technologies and provides a level 
        playing field for developing new innovation in clean coal 
        technology to meet national environmental goals.
          Remove general uncertainty in energy policy that will 
        provide investors confidence to support new innovation and 
        major investment in the clean coal sector. Our observation is 
        that policy uncertainty with respect to clean coal support 
        equates to paralysis in trying to move the Many Stars CTL 
        Project forward with its investors.

VI. Conclusion
    Given our vast mineral resources, the Crow Nation can, and should, 
be self-sufficient. We seek to develop our mineral resources in an 
economically sound, environmentally responsible and safe manner that is 
consistent with Crow culture and beliefs. The Crow people are tired of 
saying that we are resource rich and cash poor.
    We respectfully request your assistance in setting the foundation 
to make our vision a reality. We have been working to develop our 
energy resources and to remove obstacles to successful development. We 
hope to build a near-term future when our own resources, in our own 
hands, provide for the health, hopes and future of our people.
    It is critical that Congress act to protect Indian nations' 
sovereignty over their natural resources and secure Indian nations as 
the primary governing entity over their own homelands. This will have 
numerous benefits for the local communities as well as the federal 
government. 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 reducing its dependence on foreign oil. 
Many members of the Crow Nation 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, our vision can only become a reality with your assistance. I 
strongly feel that the vision starts today. 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.
                                 ______
                                 
    Mr. Young. Thank you for your testimony, and what we will 
do is go through the panel, and then we will ask questions, and 
I hope that everyone is listening very intently. Mr. Tex Hall, 
Chairman of the Three Affiliated Tribes of the Fort Berthold 
Reservation. Tex, you are up.

STATEMENT OF MR. TEX HALL, CHAIRMAN, THREE AFFILIATED TRIBES OF 
                 THE FORT BERTHOLD RESERVATION

    Mr. Hall. Chairman Young, and Members of the Committee, my 
name is Ihbudah Hishi, Red Tipped Arrow, but for today, it is 
Tex Hall, my English name. It is a great honor to present on 
behalf of my Tribal Nation, Mandan, Hidatsa and Arikara, on the 
Fort Berthold, West Central, North Dakota.
    I join my colleague, Scott Russell, in congratulating the 
Subcommittee on Indian and Alaska Native Affairs, and I 
appreciate this Subcommittee for having this hearing to 
evaluate energy development opportunities, and that is what we 
are talking about today--huge opportunities.
    And our reservation is located in the largest oil play in 
the United States. It is the Bakken Formation. The USGS, the 
United States Geological Survey, has estimated 4.3 billion 
recoverable barrels of oil.
    Mr. Chairman, like you said, they estimated 7 billion out 
of Prudhoe Bay and have recovered 17 billion. However, 
unfortunately, oil and gas exploration has lagged behind energy 
development on our reservation, as compared to the State of 
North Dakota, largely because of unnecessary red tape and 
bureaucratic delays at the Interior Department, and the EPA, in 
processing the necessary approvals under Federal law.
    As you know, oil and gas exploration is subject to 
extensive Federal oversight and overview. Leasing, permitting, 
royalty collection, royalty payments, involve five separate 
agencies; BIA, Bureau of Indian Affairs; BLM, Bureau of Land 
Management; MMS, now Bureau of Ocean Energy Management; the 
Office of Special Trustee for American Indians; and the 
Environmental Protection Agency.
    In order to comply with the many Federal laws and 
regulations that apply to Indian mineral activities, the 
Interior Department has developed a 49 step process for 
obtaining Federal approvals.
    This 49 step process can take as long as two years to 
complete to get the permit to drill. In contrast, with our 
State of North Dakota, the process for approving oil and gas 
exploration activities on non-Indian lands involves four steps.
    Oil and gas leases in North Dakota don't need governmental 
approval, and it only takes about a week-and-a-half to process 
an application for a permit to drill, and that is just unfair.
    I believe that we have to find a way to streamline this 
process for Federal review, and approval of individual Indian 
and Tribal leases, and make it less complicated, more 
efficient, and at the same time, however, it must be done to 
ensure that the Federal Government will continue to fulfill its 
trust responsibility to our Tribal Nation.
    This can be accomplished by placing all Federal authority 
in one agency on our reservation, such as through the one stop 
shop that we were working through with the Bureau of Indian 
Affairs and in the Senate.
    However, there must be adequate funding to make sure that 
all of those five agencies come on to the reservation so that 
the approvals are done on the reservation, and not done through 
our Region 8 office in Denver.
    I can't imagine trying to approve a permit from Denver, 
which is three or four States away from our tribal lands. I 
have been working for the past three-and-a-half years to 
overcome these Interior regulatory obstacles that we are facing 
so our Indian mineral owners on the Fort Berthold Reservation 
can have the same opportunities for energy exploration that 
exists on State or private lands outside the reservation.
    We have approximately 8,000 allottees on my reservation, 
and they are patiently waiting for development and for their 
opportunity for oil and gas wells to occur.
    As far as mitigating the impacts of oil and gas development 
a substantial part of revenue from oil and gas production of 
our land comes from taxes, revenues that our tribal government 
needs to take, but has a massive toll on the roads, and so it 
is a blessing, and it is a curse when oil and gas are 
developed, or is found on your reservation.
    So we are frantically trying to secure enough funding to 
make sure that there are no stranded wells because there is no 
adequate road system. So these revenues for our tribal roads 
are sorely needed.
    And, Mr. Chairman, I am running out of time, and so I have 
a copy of our latest version of our recommendation papers, and 
are attached to my statement, and I ask that it be made part of 
the record for today's hearing.
    [The prepared statement of Mr. Hall follows:]

                  Statement of Tex G. Hall, Chairman, 
  Mandan, Hidatsa and Arikara Nation of the Fort Berthold Reservation

    Good morning, Chairman Young, Ranking Member Boren, and other 
members of the Subcommittee on Indian and Alaska Native Affairs. My 
name is Tex Hall, or Ihbudah Hishi, which means ``Red Tipped Arrow.'' I 
am honored to present this testimony as the Chairman of the Mandan, 
Hidatsa and Arikara Nation of the Fort Berthold Reservation in North 
Dakota (MHA Nation).
    Let me start my testimony by expressing my appreciation to the 
Subcommittee for having this hearing to evaluate energy development 
opportunities on Indian lands.

Fort Berthold Oil and Gas Regulatory Issues
    The Fort Berthold Reservation is located in the heart of the Bakken 
Formation, which is the largest continuous oil accumulation within the 
lower 48 states. In 2008, the U.S. Geological Survey (USGS) estimated 
that the Formation contains between 3 billion and 4.3 billion barrels 
of recoverable oil. This USGS assessment compares favorably to the 
agency's most recent assessment of oil contained within the Arctic 
National Wildlife Refuge (ANWR). As of 2005, the USGS assessment for 
ANWR was that it contained between 4.3 billion and 11.8 billion barrels 
of recoverable oil.
    Unfortunately, oil and gas exploration on the Fort Berthold 
Reservation has been lagging behind energy development on non-Indian 
lands in North Dakota, largely because of unnecessary red tape and 
bureaucratic delays at the Interior Department, in processing the 
necessary approvals under Federal law.
    As you know, oil and gas exploration is subject to extensive 
Federal oversight and review. Leasing, permitting, royalty collection, 
and royalty payment activities involve five separate agencies: the 
Bureau of Indian Affairs, the Bureau of Land Management, the Bureau of 
Ocean Energy Management, the Office of the Special Trustee for American 
Indians and the Environmental Protection Agency. In order to comply 
with the many Federal laws and regulations that apply to Indian mineral 
activities, the Interior Department has developed a 49-step process for 
obtaining Federal approvals involving oil and gas exploration. This 49-
step process can take as long as two (2) years to complete.
    In contrast, the process for approving oil and gas exploration 
activities on non-Indian lands in North Dakota involves just 4 steps. 
Oil and gas leases don't need governmental approval and, according to 
the North Dakota Industrial Commission, it only takes about a week and 
a half to process an application for a permit to drill.
    I believe that we must find a way to streamline the process for 
federal review and approval of individual Indian and tribal mineral 
leases and agreements and make it less complicated and more efficient. 
At the same time, however, it must be done in a way that ensures the 
federal government will continue to fulfill its trust responsibility to 
the MHA Nation. This can be accomplished by placing all federal 
authority in one agency on our Reservation, such as through a One Stop 
Shop Office, as discussed in more detail below. There must be adequate 
funding that ensures the federal officials responsible for approving 
and regulating these leases and agreements on the ground are adequately 
qualified and that there is sufficient agency staff to meet the demand 
that comes with this extensive oil boom in the Bakken Formation.
    I have been working for the past 3 \1/2\ years to overcome the 
Interior regulatory obstacles we are facing, so that Indian mineral 
owners on the Fort Berthold Reservation can have the same opportunities 
for energy exploration that exist on private lands outside of the 
Reservation. Prior to my recent election as Chairman, and since our 
Reservation has more than 8,000 allottee owners, I formed the Fort 
Berthold Land and Mineral Owners Association several years ago, to 
represent individual allottee owners on oil and gas regulatory issues.
    As the Chairman of the MHA Nation, I now have the responsibility 
for our tribal lands as well as our individual Indian lands. Our focus 
must be on maximizing the economic benefit that the MHA Nation and its 
members can receive from the oil and gas resources under our lands. At 
the same time, our lands must be protected by appropriate federal and 
tribal regulations, adopted and enforced on a cooperative basis, which 
protects our environment and our people.

Mitigating the Impacts of Oil and Gas Development
    A substantial amount of revenue from oil and gas production on our 
land comes from taxes, revenues that the our tribal government needs to 
help mitigate the massive toll on our roads, law enforcement, fire and 
emergency protection, and environment that comes with this oil boom. 
Oil and gas is a nonrenewable resource. Once it is extracted and sold 
by the oil companies that lease our lands, it is gone forever. As a 
result of the continued threat of double State and tribal taxation on 
Indian energy development on the Reservation, the tax revenue that the 
MHA Nation receives from production on tribal lands has not been 
maximized. Indian tribes should be the primary beneficiaries of the tax 
revenue that is generated from energy production on Indian land. These 
revenues are sorely needed to keep up with the overwhelming burden that 
oil and gas production puts on our roads, our natural and human 
resources.
    While the oil and gas industry has brought increased economic 
opportunities to the MHA Nation, those increased opportunities have not 
come without costs. The three most visible of those costs are the 
virtual destruction of many of our Reservation roads, the advent of new 
law enforcement and public safety needs, and the negative environmental 
impacts associated with oil and gas development.

    1. Reservation Roads Costs. Let me start with the impact on our 
roads. The Fort Berthold Reservation encompasses approximately 1 
million acres, approximately 1,544 square miles, and 1,520 miles of 
roads, a sizable percentage of which are used by the oil and gas 
industry. The Reservation encompasses parts of six North Dakota 
Counties: Mountrail, McKenzie, Ward, McLean, Dunn and Mercer. 
Approximately half of the Reservation consists of tribal and allotted 
trust land. Of the 1,520 miles of roads, more than 70%, or 1,200 miles, 
are in the Bureau of Indian Affairs (BIA) inventory system. Roads in 
the BIA inventory are broken down as follows:
          Rural minor arterial roads: 141.2 miles
          Community streets: 28.7 miles
          Rural major collector roads: 191.5 miles
          Rural local roads: 729.5 miles
          City minor arterial streets: 6.8 miles
    In addition to the 1,200 miles of BIA/Tribal Indian Reservation 
roads described above, there are also approximately 664.4 miles of 
county roads and 150 miles of state highways within the Reservation. 
There also is an undetermined amount of private roads and abandoned BIA 
roads that are impacted to various extents by the oil and gas industry. 
Unfortunately, this ownership pattern has made it difficult, and in 
some cases, impossible, to keep these roads maintained in a manner 
which is safe for both the industry and tribal members.
    The current road system was not constructed to withstand the weight 
and volume of heavy truck traffic that accompanies the oil boom. The 
damage being done daily is enormous, and the MHA Nation does not nearly 
have the resources to keep up with the burden. For example, the MHA 
Nation recently had to break up the existing pavement and resurface it 
with additional gravel paid for by the Nation. The estimated cost was 
over $500,000. The work was necessary because the oil traffic literally 
destroyed the road faster than any paving contract could repair it.
    Despite the safety hazards presented, the Nation was forced to pay 
for this work itself, because the BIA's roads maintenance funding 
distribution formula is based almost exclusively on maintaining roads 
utilized by normal non-industrial traffic. At a minimum this year, 56.2 
miles of BIA/Tribal roads need to be reconstructed immediately, with 
more reconstruction becoming necessary in the future. According to the 
BIA Roads Engineer, the estimated cost for adequate design and 
reconstruction of the inferior roads is approximately $1.5 million per 
mile, which equals over $84.3 million.
    The current roads on the Reservation are also beyond their life 
span. The highways were built with 2 inches of bituminous asphalt in 
the 1970s-80s, not enough to withstand the heavy traffic that comes 
with oil trucks and oil-related traffic. The MHA Nation has currently 
over 2,500 trucks working on the Reservation; and each oil well from 
drilling to production takes over 2,024 trips per year per truck. The 
MHA Nation is anticipating over 200 new oil wells this coming year, 
which will triple the number of trucks on our roads.
    According to our tribal records 57.7% of the Reservation roads are 
gravel, 26.6% are paved and 16% are primitive dirt. Much of the current 
system remains inaccessible to drilling and is in need of immediate 
upgrade to allow access to well sites; we cannot afford to have 
potential stranded wells. In addition to the immediate repairs and 
upgrades needed, we estimate that it will cost millions of dollars per 
year to maintain the Reservation roads as long as the oil boom lasts. 
The current BIA budget to maintain our road system is a paltry 
$456,000.
    Travel is hazardous even in good weather. The damage which has been 
and will continue to be inflicted on the tribal, county, and state road 
system has made travel on those roads very hazardous. As a result, our 
traffic accidents and fatalities have dramatically increased since 2007 
when the oil activity began. Presently, there are so many potholes and 
ruts on our tribal roads that the MHA Nation simply cannot keep up with 
them. In fact, many of our roads are so deteriorated, that when we can 
find the money to repair a small stretch, the patch does not hold and 
the next section of road just falls away. This winter's snow 
accumulation has doubled our snow removal budget and our small crew has 
to work around the clock to keep our roads open for this oil traffic. 
For all of these reasons, our roads currently present a very real 
danger to our school busses, emergency vehicles, the general public, 
and even the vehicles operated by the oil and gas industry itself. 
Those roads are also costing our citizens, our governments and the oil 
and gas industry itself thousands of dollars a year in vehicle repairs 
and replacements, and this situation is and will continue to stifle 
economic growth.
    Let me make it clear that the MHA Nation is already doing its part. 
We are currently supplementing the BIA roads budget with over $2 
million in tribal funds. We are so concerned with the safety of the 
public and of the oil and gas workers themselves that we are spending 
as much of our own money as possible to address this problem. 
Unfortunately, that is simply not enough. Thus, we need your help in 
the form of a practical and equitable adjustment of the allocation of 
oil and gas related tax dollars. The MHA Nation is not looking for a 
windfall; it is simply looking for the funds necessary to allow this 
economic boom to continue in a safe and responsible manner.
    Mr. Chairman, nothing is more important to any of us than the 
safety of our citizens and to put it bluntly--on these roads, our 
citizens are not safe.

    2. Law Enforcement Costs. In addition, the MHA Nation has very 
serious and very pressing law enforcement and public safety problems 
that have to be addressed immediately, and those problems can only be 
addressed with increased dollars. The influx of new oil and gas workers 
has created a great deal of strain on our already severely underfunded 
tribal law enforcement and highway law enforcement systems. At present, 
the MHA Nation can only afford to employ thirteen (13) law enforcement 
officers--and this is after the Nation supplements the federal law 
enforcement dollars that we receive by approximately $1 million a year.
    These thirteen officers are, according to testimony presented to 
the Congress by the Bureau of Indian Affairs in 2010, only 1/3 of the 
minimum number of officers that we require just to service our own 
Reservation population of approximately 12,500 (approximately 10,000 of 
whom are Indian). This does not include the thousands who are on the 
Reservation on a temporary basis just to work. Add to this the number 
of officers that we now require in order to serve the increasing 
population from new oil and gas workers in our communities, the 
increased traffic, the large land base our officers must cover, the 
increased number of automobile accidents and increased fatalities 
created by our ever deteriorating roads and the heavy traffic, and you 
can begin to see just how serious our situation really is.
    The substantial increase in population brought on by oil boom on 
the Reservation has brought with it an increased burden on law 
enforcement. A recent article in the Bismarck Tribune reported that 
police calls in Williston, a city just west of our Reservation and also 
in the Bakken formation, have increased 250% in the last year. We face 
the same problem on our Reservation because of the distances our 
officers have to travel, and the substantial increase in calls for 
police assistance. Our police response time has now risen to up to 1 
hour in some cases, which is unacceptable. This coupled with the 
significantly increased costs of repairing police vehicles which are 
traveling 1,500 miles or more a day on our deteriorated roads, has left 
our small tribal police department and its budget stretched to the 
breaking point. For all of these reasons, we need more law enforcement 
resources in order to protect the public and without those resources, 
people will continue to suffer unnecessarily.
    The MHA Nation is in the process of constructing a health clinic. 
The clinic is underfunded and my Administration has made it a priority 
to find sufficient funds from all available sources to build a larger 
and better facility and one that has an emergency response capability 
for our Nation members and for oil and gas potential accidents. In 
addition, we need ambulance and air ambulatory services that will 
deliver much needed critical care. Additional funding is needed to 
build houses to recruit and support doctors, nurses and clinic staff.

    3. Environmental Costs. No one disputes the overwhelming effect 
that the oil and gas boom in western North Dakota is having on our 
tribal, county, and local governments, as well as our citizens in 
western North Dakota. The impact on our roads, infrastructure, law 
enforcement, emergency services, and particularly our natural 
environment, has far exceeded the resources our respective governments 
have to keep up with the burden.
    The need for a fair, cooperative and comprehensive oil and gas tax 
and regulatory system on the Fort Berthold Reservation is critical as 
we move forward to deal with the continuing onslaught that comes with 
this economic boom. Mr. Chairman and members of the Subcommittee, it is 
particularly important to recognize that we all have a responsibility 
to ensure that the oil and gas industry is held accountable for the 
responsible development of our resources. This is particularly true 
when it comes to the dust, the fumes, and the damage to our roads, our 
horses and cattle, and the increased danger to our people as a result 
of the heavy truck traffic that comes with oil and gas activity. We 
must all be concerned about the transportation and use of the chemicals 
used in the oil fields of western North Dakota and to make sure that it 
is done in a safe and responsible manner.
    The MHA Nation needs more revenue to catch up to and get ahead of 
the enormous burden the oil and gas development is putting on our roads 
and infrastructure, our law enforcement and emergency response 
personnel, and to help put an effective regulatory and inspection 
system in place to protect our natural and human resources. This must 
come from all available federal funding sources, as well as 
Congressional support of an amendment to existing Indian energy 
legislation that levels the playing field on energy tax issues by 
clarifying that Indian tribes have the exclusive authority to tax 
energy development on Indian lands.

Outstanding Regulatory Issues
    We must have a coordinated regulatory system in place to protect 
our land and our resources while we promote responsible development. 
Over the past several years, our Allottee Association has developed 
very detailed recommendations for addressing the outstanding oil and 
gas regulatory issues on the Reservation. A copy of the latest version 
of our recommendations paper is attached to my statement.
    While we have certainly made progress, there are still many issues 
which have not been addressed by the Department. Let me highlight for 
you the most significant of these outstanding issues:

    1. Improved Staffing. The Interior Department was not prepared for 
the level of oil and gas approval requests at Fort Berthold, when 
leasing and exploration activities began in earnest in 2007. With help 
from the North Dakota Congressional delegation, we were able to 
increase staffing for these regulatory activities at both the Fort 
Berthold Agency and the Great Plains Regional Office. The Department 
also accepted our recommendation that a ``One Stop Shop Office'' begin 
operation at Fort Berthold, in order to ensure that all four Interior 
agencies are represented in one location and can operate in a 
coordinated fashion. Unfortunately, Congress has yet to provide funding 
for the personnel necessary to staff this One Stop Shop Office. As a 
result, mistakes have been made and leases have been approved at less 
than market value.
    Let me give you one example. In early 2008, the BIA approved a 
tribal lease executed pursuant to the Indian Mineral Development Act 
that tied up nearly 42,000 acres. The bonus paid for this lease was $50 
per acre, at a time when bonuses for oil and gas leases in the Bakken, 
including leases on the Reservation, were going for $1000 or more an 
acre. This is inexcusable.
    Last year's energy bill that contained language for funding the One 
Stop Shop Office did not make it through Congress. Therefore, there is 
no budget available to continue this concept. The BIA staff still 
support the need for this important concept and agree the funds should 
be provided to implement it. I share this view, and urge the Congress 
to fund and support the concept of a One Stop Shop Office, to 
streamline the process for the approval of and regulation of Indian oil 
and gas leases.
    It is my understanding that the Obama Administration has requested 
an additional $1 million in funding for energy development on our 
Reservation in Fiscal Year 2012, including a $500,000 increase for 
staff support at the One Stop Shop Office. While this is a step in the 
right direction and worthy of support, I want to make sure that we are 
taking a comprehensive approach to the Fort Berthold staffing problems 
and are not just increasing Interior budgetary authority.

    2. Better Communications. The Department of the Interior has now 
detailed an employee from the Division of Energy and Mineral 
Development in Lakewood, Colorado to assist the BIA at the Fort 
Berthold Agency in New Town. This is a positive step. However, more 
resources are needed. In particular, the Department needs to improve 
the manner in which it interacts with the 8,000 allottee mineral owners 
on the Reservation. We have suggested that the Department create an 
allottee liaison function at the Fort Berthold Agency and also at the 
Great Plains Regional Office. People appointed as allottee liaisons 
would serve as the primary point of contact for individual mineral 
owners who have questions and need specific information about 
regulatory approvals.
    Allottee owners also should be consulted by the Department on 
issues and specific approvals that affect their mineral interests.
    As an additional step to improve communication and transparency, 
each of the four Interior agencies should issue a monthly report to 
interested parties on the status of approvals. Each Interior agency 
also should maintain a periodic in-person presence at the One Stop Shop 
Office, in order to answer questions from interested parties and to 
address outstanding regulatory issues.

    3. Streamlined Regulatory Procedures. Over the past three years, we 
have identified a number of areas where the Department can streamline 
and improve its regulatory procedures. For example, the Interior 
agencies responsible for various oil and gas leasing activities will 
each apply a different lease number to the same parcel of allotted or 
tribal land on the Reservation. My understanding is that these Interior 
agencies all have different computer systems, with no standardization 
(or coordination) among these agencies on the assignment of a lease 
number. In my view, it makes no sense to have three different lease 
numbers for the same parcel of land under lease. It is confusing to 
everyone and it slows down the process to have this lack of 
standardization within the Department on such a critical issue.
    A second example of a lack of inter-agency coordination at Interior 
involves well completion reports. Energy companies have to notify the 
Department when a well is producing. For some reason, there is a lack 
of coordination between the Interior agency responsible for the well 
being drilled (the Bureau of Land Management) and the agency 
responsible for the royalty payments after the well begins producing 
(the Bureau of Ocean Energy Management, formerly the Minerals 
Management Service).
    A third problem is the fact that there is significant duplication 
among the different Interior agencies regarding rental payments being 
paid on each parcel of leased land. Confusion exists about how these 
rental payments are to be made once a well moves from being drilled to 
one that is producing.
    All of these coordination problems make it very complicated for an 
Indian mineral owner (or an energy company) to know what is going on. 
Royalty checks show up without any identification regarding which 
parcel is producing oil and natural gas. Approvals involving the Bureau 
of Land Management have a different lease number for a parcel than the 
number used by the Bureau of Indian Affairs in originally approving the 
lease for that same parcel. And there is no auditing process for an 
Indian mineral owner to verify that any of the payments being received 
are for the correct amounts. Remarkably, an Indian mineral owner 
receives a series of individual checks in the mail for each leased 
parcel, with no information about the purpose of each check or the 
calculations behind the amounts being disbursed.

    4. Better Interior Recordkeeping. The Department needs to modernize 
its internal recordkeeping processes. The first problem involves the 
Land Title and Records Office at the Great Plains Regional Office. 
Numerous title mistakes are still being made by this Office, including 
life estate ownership, probate, and accounting errors. And the problem 
is only going to get worse, as oil exploration activities increase on 
the Reservation. We need an improved land title verification system and 
one that can function in the same manner and with the same electronic 
capabilities as a County land records office in North Dakota.
    Second, the Department needs to upgrade its filing and tracking 
system at Fort Berthold for leases, applications, and other approval 
requests. There have been far too many situations in which Department 
officials can't locate paperwork or figure out the status of a pending 
approval request.

    5. New Pipeline Infrastructure. The Fort Berthold Reservation has 
very little infrastructure to transport oil and natural gas through and 
outside the Reservation, from the many wells that are now operating on 
our lands. Since we have almost no pipeline capacity at Fort Berthold, 
energy companies are primarily using trucks to transport oil from the 
wells to market. Natural gas can only be transported through a pipeline 
and so most of it is lost into the atmosphere instead of being gathered 
and transported to market.
    Our lack of pipeline infrastructure is resulting in a significant 
loss of revenue, taxes, and royalty payments for everyone involved.
    We need a comprehensive infrastructure solution that will serve all 
the Indian mineral owners on the Reservation, in gathering and 
transporting oil and gas from individual wells. The Department needs to 
partner with us to ensure that pipeline infrastructure is build on the 
Reservation as quickly as possible and that it offers a comprehensive 
solution to our needs in this area, both to ensure public safety and to 
maximize the use of our energy resources.

    6. More Coordination with the State. In 2008, the now former 
Chairman of the MHA Nation signed a Regulatory Agreement with the State 
of North Dakota, to improve the coordination between our Nation and the 
State on certain oil and gas issues. This Agreement is important in 
that it provides certainty for energy operators on what the rules are 
and which governmental entity has responsibility for each oil and gas 
exploration function.
    Unfortunately, the State insisted on several provisions that are 
inconsistent with our Tribe's sovereignty and also inconsistent with 
Federal standards. As a result, the Agreement has not been approved by 
the Department and has not been renegotiated. It is sitting on 
someone's desk at Main Interior, despite being signed almost 3 years 
ago.
    This Regulatory Agreement needs to be renegotiated and approved by 
all the parties: the Three Affiliated Tribes, the State, and the 
Department. We should not have to wait so long for the Department to 
evaluate this Agreement and work with us to fix the problems regarding 
our sovereignty and how best to meet Federal standards.

    7. Improved Interior Decision-making Processes. To improve 
coordination among the four Interior agencies responsible for different 
oil and gas regulatory functions, the Department should develop a 
written Memorandum of Understanding among the affected Interior 
agencies, outlining the specific authorities and responsibilities of 
the One Stop Shop Office at Fort Berthold. The purpose of this 
Memorandum of Understanding should be to create an internal process to 
resolve issues among Interior agencies and improve the coordination of 
responsibilities involving oil and gas approvals on the Reservation.
    A second step that the Department should consider is the formation 
of a Fort Berthold Oil and Gas Advisory Committee, to provide the 
Department with the views of a broad spectrum of stakeholders involved 
with oil and gas exploration activities. You can see that we have a 
long list of outstanding regulatory issues at Fort Berthold and we need 
some type of forum or process to discuss and evaluate these unresolved 
issues. As energy exploration activities continue to increase rapidly, 
the pressures on the Interior regulatory system are only going to 
become worse. Everyone involved in oil and gas activities at Fort 
Berthold needs an efficient and effective process to develop solutions 
to our regulatory problems.

    8. Communitization Agreements. A further issue involves 
Communitization Agreements. Indian mineral owners are not being paid 
their royalties at the same time as non-Indian mineral owners. To 
remedy this problem, the Bureau of Land Management should require 
energy companies to apply for a Communitization Agreement at the same 
time they file an Application for Permit to Drill (APD).

    9. EPA Minor Source Rule. My final point involves the proposal by 
the Environmental Protection Agency (EPA) to promulgate its minor 
source rule. The MHA Nation is concerned about the impact this new rule 
may have on oil and gas exploration and has urged the EPA to engage in 
government-to-government consultations regarding the implementation of 
this rule before it is finalized.
    The Bakken Formation presents a very important opportunity to help 
improve the energy security of the United States by reducing our 
dependence on foreign--and volatile--sources for oil and natural gas. 
The Bakken Formation also can provide numerous benefits to the MHA 
Nation and its members. Exploration of this important resource is a 
true ``win-win'' proposition, as it will help our country increase its 
domestic energy supplies and it will provide needed financial resources 
to the MHA Nation and to the more than 8,000 allottee owners on our 
Reservation.

A Petroleum Refinery on the Fort Berthold Reservation
    The MHA Nation has been working for the past eight (8) years to 
finalize the process under the National Environmental Policy Act (NEPA) 
to begin construction of its MHA Nation Clean Fuels Refinery Project 
(Project). Since publication of the Final Environmental Impact 
Statement (FEIS), the Environmental Protection Agency (EPA) has delayed 
issuance of a Record of Decision (ROD) for fear of litigation. This 
litigation fear stems from a few comments that EPA received during the 
project's comment period which pointed out the absence of an EPA air 
permit for the Project. Although EPA concluded that the Project 
qualifies as a minor source which is currently not subject to air 
permitting requirements under the Clean Air Act (CAA), a handful of 
comments threatened suit against the EPA and called for further review 
of the Project. These concerns have halted EPA's efforts to move 
forward with its issuance of the ROD.
    Initially, feedstock for the Project was expected to consist of 
10,000 barrels per stream day (BPSD) of synthetic crude oil via 
existing pipeline from Albert, Canada; 3,000 BPSD of field butane from 
local suppliers; 6 million standard cubic feet per day of natural gas 
via existing pipeline; and 300 barrels of bio-diesel or 8,500 bushels 
per day of soybeans. However, since that time, advances in technology 
and development of the hydraulic fracturing process have created an 
abundant supply of Bakken crude produced on and near the Fort Berthold 
Reservation. Given the cost savings, the Tribe determined that it would 
be more feasible, and in its best interest, to change the feedstock for 
the Project from synthetic Canadian crude to Bakken crude. We notified 
EPA of our decision in December of 2009. Unfortunately, this change 
raised further EPA questions regarding the air quality and emissions 
which would result from this change and the overall impact that the 
change would have on the air quality impact report.
    From December 2009 to the present, the EPA withdrew its Prevention 
of Significant Deterioration (PSD) non-determination letter dated April 
2005 and requested additional information from the Nation and its 
consultants regarding the air quality studies conducted for the 
Project. The Nation has worked diligently to respond to EPA's concerns, 
but as of yet, to little or no avail. Although the Nation has conducted 
an assay of the change in feedstock which clearly demonstrates that the 
emissions for Bakken are much lower and at times even better than 
synthetic Canadian crude, EPA is asserting that a complete supplement 
to the Final EIS may be necessary. This would delay the issuance of a 
ROD for an additional two (2) years. As a result of all of this EPA-
created delay, the Tribe is now finding that it is likely going to face 
new and additional regulatory requirements before a ROD can be issued.
    On March 9, 2011, the Nation met with representatives of the EPA--
Region 8 Office, and was advised that issuance of a ROD would not be 
likely prior to implementation of the EPA's new greenhouse gas 
regulations which are scheduled to go into effect on July 1, 2011. The 
basis for the EPA's position is its continued fear of litigation for 
failing to comply with NEPA. As a result, the EPA--Region 8 Office 
proffered the following options for the Nation:
          Issue a ROD despite the change in feedstock and 
        supplement the record;
          Supplement the final EIS which will require an 
        additional two (2) years of review;
          Designate the Project as a minor source--which still 
        requires more information; or
          Await implementation of the minor NSR rule for Indian 
        Country to determine whether the Project can be classified as a 
        minor source and therefore, subject to obtaining a minor source 
        permit under the minor NSR rule.
    The MHA Nation clearly expressed its support for issuing a ROD and 
supplementing the record so that it can begin construction of the 
Project and avoid application of the new EPA greenhouse gas 
regulations. However, the Region 8 Office indicated that it must defer 
to the EPA leaders in Washington, D.C., to make the final decision as 
to whether a ROD may be issued by supplementing the record.
    Given all that we have gone through, we are now calling upon 
Congress to take charge over this matter by providing us with an 
exception to the greenhouse gas regulations scheduled to go into effect 
on July 1, 2011, and any other regulations that will likely subject the 
Project to further delay. We have worked long and hard to meet all of 
EPA's demands and we feel strongly that we should not have to go 
through a whole series of new steps simply because EPA has delayed its 
approvals and decided to change its regulations.

Wind Energy Opportunities in the Great Plains
    Mr. Chairman, let me quickly present one final issue: wind energy. 
As you know, the MHA Nation and the other Tribes in the Great Plains 
have great wind potential. Unfortunately, many of us are simply too far 
from the grid to make such development cost effective. To address this 
problem, we need additional transmission lines and upgraded systems to 
allow the wind energy that we hope to develop to be moved to the areas 
where it is needed.
    To insure our successful wind energy development, many of the 
Tribes in the Great Plains have joined together as members of the 
Intertribal Council On Utility Policy (COUP) Wind Project. This group 
is currently working with the Western Area Power Administration (WAPA), 
and views WAPA as its primary market. Today, WAPA is still purchasing 
coal fired power to meet its hydropower contracts. This does not make 
good environmental sense, as we have huge amounts of carbon-free wind 
blowing in our area every day.
    In 2009, a Wind and Hydropower Feasibility Study (WHFS) was 
completed which found that tribal wind projects are feasible, but the 
study had several shortcomings. First, it failed to show how tribal 
wind energy will fit into the current purchase and transition systems, 
given the current contracts that groups like WAPA already have with 
other energy producers. Second, it did not adequately address new and 
better ways to integrate wind and hydropower generation in our area. 
Finally, it did not look carefully enough at ways to increase 
transmission capacity through the development and construction of a new 
and more efficient grid. Our Intertribal COUP Project has a team of 
wind energy and interconnection experts who are ready to complete this 
study. This additional research is already authorized. We simply need a 
$1 million appropriation to complete the work this year.
    I would also ask the Subcommittee to consider authorizing a 1000 
mega watt Intertribal Wind Energy Demonstration Project in our area. 
The demonstration project that I am proposing would produce clean 
energy at market rates under long-term, rate-based, fixed price 
contracts. We believe that such a demonstration project will show that 
new well planned tribal wind energy systems can produce savings by 
minimizing or even eliminating the need for supplemental purchases from 
hydropower producers. If funded, this demonstration project will 
provide clear energy to WAPA customers, and allow an increased portion 
of the federal grid system to be used to meet the new clean energy 
standards that Americans are now demanding.

Conclusion
    Chairman Young and members of the Subcommittee, thank you again for 
the opportunity to highlight for you some of the more significant 
regulatory issues we face at Fort Berthold and the wind energy 
opportunities that are before us.
    At the appropriate time, I am happy to answer any questions you may 
have.
                                 ______
                                 
    Mr. Young. That will be done, and I thank you, Tex, and we 
are going to hear the last witness, and if anybody wants to 
leave, we do have a series of five votes, and when that last 
witness is over, you guys can relax, go to the restroom, or do 
whatever you want to do.
    We will be back, I would say, in about 35 minutes, or maybe 
40 minutes. So, Mr. Shelly, you are up.

       STATEMENT OF BEN SHELLY, PRESIDENT, NAVAJO NATION

    Mr. Shelly. Thank you very much, and good morning, Chairman 
Young, Committee Members, and also Tribal Leaders. I am Ben 
Shelly, the President of the Navajo Nation. I want to thank 
Congressman Lujan, and also Congressman Gosar, for their 
service to the Navajo Nation.
    I look forward to working with this Congress, and also 
President Obama's Administration, in developing a comprehensive 
tribal energy policy, a policy that promotes the interests of 
the tribe first.
    The relationship between the Navajo Nation and the United 
States is a complex one, based upon a government-to-government 
relationship. Nevertheless, this relationship has been less 
than desirable at times.
    It is estimated that 32 percent of the Navajo homes lack 
electricity; 86 percent, natural gas; 40 percent of Navajo are 
unemployed; and 40 percent of Navajo live below the Federal 
poverty line.
    As the Navajo Nation President, I take on this as my 
responsibility. We are all in this together, and we have to 
work together to create jobs and improve our economy. The key 
to our prosperity and self-determination is our people and our 
land.
    We hold significant renewable and non-renewable natural 
resources, including coal, oil, and natural gas. The Navajo 
Nation is resource rich, and we want development of our 
resource.
    Nevertheless, we have been held back for many reasons. I 
believe the United States leadership when they tell me that 
they want to help us develop our resources, but that message 
seems to get lost with the Federal Government.
    I feel that there is too much red tape on our projects. We 
need a balanced approach that provides for the much-needed 
development of our lands, while at the same time providing 
sufficient safeguards.
    At the Navajo Nation, we prefer a multi-prong approach to 
our energy reserve. We are balancing our economic opportunity 
with our environmental concern. We are taking a realistic view 
at the following energy package, number one, renewable energy.
    And, number two, a viable future with coal, clean coal 
technology, and a phased approach to emission reduction, and 
three, alternative energy sources. Desert Rock utilized modern 
coal technology. The Desert Rock project is a clean coal 
generating power plant, proposed by the Sithe Corporation in 
partnership with the Navajo Nation.
    Desert Rock will be one of the newest and cleanest coal 
generating plants in the country. Desert Rock will provide one-
third of the Navajo Nation's entire annual budget and allow us 
to head toward the path of self-determination.
    The United States issued a permit in 2008, but rescinded 
the permit in 2009. Currently, the permit is under appeal by 
the Navajo Nation. There are many important considerations that 
a Federal agency must review when proposing rulemaking that 
will affect the energy development goals of the Navajo Nation.
    We are planning to operate our power plant at significant 
emission reduction. Last, I want to affirm that the Navajo 
Nation's position concerning uranium mining. Let me be clear 
that the Navajo Nation opposes uranium mining on our land.
    At the same time, the Navajo Nation opposes any budget cuts 
to the Surface Mining Control and Reclamation Act. That funds 
the Navajo Nation's AML, programs to clean up over 1,000 
scattered, abandoned, and dangerous mines.
    From the heart, I would like to say this. We have honored 
the codetalker. Out of the original 29, we only have one left. 
We honor them, and most of the people that left the codetalker 
did not have running water or electric.
    Please, honor them, by advancing and helping us with the 
red tape that we go through with our energy. Recognize us. I 
want to form an energy team, and a Native energy team will be 
good for the United States, and for our partners, also with the 
States and the Federal Government.
    If we have employment, we will have taxes, and I think that 
some of these deficits that we have, that State and Federal 
governments are going through, will help. We would like to help 
in that area. Thank you very much.
    [The prepared statement of Mr. Shelly follows:]

         Statement of Ben Shelly, President, The Navajo Nation

                        NAVAJO NATION BACKGROUND

    The Navajo Nation (Nation) wants to attract businesses and lay down 
a track for investments in infrastructure, development and renewable 
energy that will create a stronger-driven, prosperous Nation. We have 
significant renewable and non-renewable natural resources, including 
substantial reserves of coal, oil and natural gas.
    It has been exciting to be part of a new beginning for our Nation 
to restructure and streamline, using our fresh ideas and traditional 
teachings to complete our challenges and lay a solid foundation for 
future generations.
    Our Nation has approximately 300,000 members and covers more than 
27,000 square miles within the exterior boundaries of Arizona, New 
Mexico, and Utah, also occupying parts of 13 counties in those states.
    The Navajo people also combat extreme poverty placing the 
reservation among the lowest echelons of socio-economic indicators for 
any graphic region in the United States. The latest statistics indicate 
that 48% of the Navajo people are unemployed and 40% live below the 
federal poverty line.
    Our living conditions are considered substandard. An estimated 25% 
of homes on the reservation are traditional Navajo dwellings, called 
hogans. The remaining 75% of housing is comprised of mobile homes, 
modular buildings, and standard homes. Basic amenities are lacking in 
the following areas: 31% do not have complete plumbing, 28% do not have 
operational kitchen facilities, 38% do not have water services, 32% are 
without electricity, 86% do not have natural gas services, and 60% of 
the homes lack telephone service.
    We are all in this together and as neighbors, we have to work 
together to create jobs and improve our economies.

               MULTI-PRONG APPROACH TO ENERGY DEVELOPMENT

    The Navajo Nation prefers a multi-prong approach to capitalize on 
our energy needs. Several energy options are at our disposal. We 
balance our economic opportunities with our environmental concerns and 
take a realistic view of the following energy packages: 1) Renewable 
Energy: a) wind, b) solar, c) other technologies, and d) extend the 
production tax credits and investment tax credits which support the 
growth of renewable energy, 2) A viable future with coal: a) clean coal 
technology and, b) applying sophisticated best available retrofit 
technology for existing coal development, and 3) Natural gas fired 
power plants.
    Additionally, we oppose uranium mining on the Navajo Nation 
reservation. In the same vein, the Navajo Nation opposes any budget 
cuts to the Surface Mining Control and Reclamation Act (SMCRA) that 
funds Navajo Nation Abandoned Mine Lands (AML) Reclamation Program.
1) Renewable Energy
    We are blessed with an abundance of natural resources including 
coal, oil and natural gas, as well as renewable resources, such as wind 
and solar. The Navajo Nation endorses renewable energy resources and 
embraces a vision for an energy economy that ensures long-term economic 
and social progress that positively impacts the regional economies of 
the Four Corner States.

A. WIND GENERATION
    The Navajo Nation is working on three sites for utility-scaled wind 
generation development:
        1.  Boquillas Ranch (Seligman, Arizona): Potential for up to 
        500 Mega Watt (MW) wind farm. Leases for phase 1A and 1B were 
        approved by the Navajo Nation Council in December 22, 2009, 
        with groundbreaking anticipated in December 2011.
        2.  Gray Mountain (Cameron, Arizona): Potential for up to 500 
        MW wind farm. Grey Mountain is likely the best wind site on the 
        Nation. We are working with the local community and potential 
        developers to realize this project. We have secured the 
        interconnection queue position to transmit power from this 
        proposed wind farm.
        3.  Black Mesa (Kayenta, Arizona): Potential for up to 200MW 
        wind farm. Preliminary wind data warrants formal wind study at 
        two sites on Black Mesa.
    The Navajo Nation is actively exploring other potential wind sites.

B. SOLAR GENERATION
    The location of the Navajo Nation (its latitude and elevation) 
makes it extremely attractive for solar generation development. To 
accelerate solar development, we are partnering with the U.S. 
Environmental Protection Agency (USEPA) to assess and prioritize 
potential sites for solar development.

C. OTHER TECHNOLOGIES
    The Navajo Nation is exploring additional technologies such as: 
waste-to-energy, geothermal, and biomass opportunities available to our 
Nation.

D.  CONGRESS SHOULD EXTEND PRODUCTION AND INVESTMENT TAX CREDITS FOR 
        RENEWABLE ENERGY
    The Navajo Nation has benefitted from the American Recovery and 
Reinvestment Act of 2009, which extends both the production and 
investment tax credits. Some companies that generate wind, solar, and 
geothermal energy benefit from the tax credits and are incentivized to 
develop renewable energy projects on reservation. These tax credits 
will end in 2013. Congress should renew this legislation today to 
provide additional time for entrepreneurs to plan ahead so they are 
able to make investments that promote economic development on the 
reservation.

                         CLEAN COAL TECHNOLOGY

A) DESERT ROCK
    Desert Rock Energy Project (Desert Rock) is proposed by Sithe 
Corporation (Sithe) in partnership with Dine Power Authority (DPA), a 
Navajo Nation Enterprise. Desert Rock is a merchant power plant, 
meaning that Sithe plans to sell power on the open market and has no 
current contracts. Sithe has suggested that Desert Rock ``off-takers'' 
(buyers of power) include Arizona Public Service, Nevada Power, and the 
Salt River Project, for energy primarily slated for Tucson/Phoenix and 
the Las Vegas markets. A small percentage, up to 5%, of the proposed 
power from Desert Rock would stay on the Navajo Nation, where many 
citizens continue to live without electricity.
    The USEPA issued a Prevention of Significant Deterioration permit 
in 2008; but remanded the approved permit in 2009. Currently, the 
permit is under appeal. The denial of the permit has stopped the Desert 
Rock Project.
    Desert Rock will be one of the newest and cleanest coal generating 
plants in the country. Revenues from Desert Rock will be about one-
third of the entire Navajo Budget and will allow us to head towards the 
path of self-sufficiency. Thousands of construction and high paying 
full-time jobs will be lost.

B)  CURRENT POWER PLANTS NEED TO APPLY SOPHISTICATED 
        BEST AVAILABLE RETROFIT TECHNOLOGY FOR EXISTING COAL 
        DEVELOPMENT
    The Navajo Nation seeks a balance between environmental protection 
to promote human health and economic opportunities supporting job 
sustainability. It is important for the federal government to make good 
on its responsibilities to properly consult with the Navajo Nation 
regarding any policies or decisions that could affect us since these 
pending Proposed Rules and future Rules could devastate the Energy 
Industry.
    Accordingly, last year the Navajo Nation submitted comments to 
USEPA regarding the Advance Notice of Proposed Rulemaking: Assessment 
of Anticipated Visibility of Improvements at Surrounding Class 1 Areas 
and Cost Effectiveness of Best Available Retrofit Technology (BART) of 
the Four Corners Power Plant and Navajo Generating Station. The Navajo 
Nation recommended the following:
        a.  A phased approach to emissions reductions for the plants, 
        in coordination with the glide path from 2004 to 2064, and
        b.  Combustion controls--low NOx burners, or LOX and 
        separated over fire air technology or SOFA, are BART for both 
        Plants at this time (we did not agree to the use of Selective 
        Catalytic Reduction (SCR) technology, and
        c.  USEPA should incorporate the use of real, recorded, and 
        available data be used in its decision making instead of 
        relying solely on modeling data, and
        d.  USEPA should seriously consider the potential negative 
        impacts to the fragile Navajo Nation economy due to a decision 
        that requires the use of high cost SCR technology.
    There are many important considerations that federal agencies, such 
as the USEPA, must review in light of any rulemaking that may affect 
the energy development goals of the Navajo Nation. The USEPA has a 
framework in place to guide government-to-government consultation and 
policies that consider impacts to Indian lands. The Navajo Nation has 
provided many of its natural resources for the benefit of its own 
people and many others throughout the Southwest. We know our coal 
reserves can continue to supply solid base load electricity, and we 
know it is important to expand our renewable energy portfolio. We are 
ready to work side-by-side with you to address and resolve energy 
demands in our local communities and across the Southwest.

3) NATURAL GAS POWERED POWER PLANTS
    The Navajo Nation is looking at all future viable alternatives in 
energy development. Natural gas generated power plants have limited 
environmental degradation potential. It's estimated that the Navajo 
Nation has 25 trillion cubic feet of natural gas. It is one of our top 
alternative energy resources.
                     NAVAJO OPPOSES URANIUM MINING
    The Dine Natural Resources Protection Act of 2005 is still in 
effect which essentially bans uranium mining and processing on the 
Navajo Nation.
    We are deeply empathetic to this subject and we stand against 
uranium mining on the reservation. The Navajo Nation contributes to the 
energy needs of the American public, however, we still suffer 
devastating health impacts from uranium mining that took place during 
World War II efforts.
    We are very concerned about the long-term health impacts from 
uranium that have affected our people and communities. Today, there are 
still uranium hot spots on the reservation. Some of the abandoned 
uranium mines even impacts our groundwater resources and our drinking 
water.
    We are asking Congress to do everything possible to continue the 
scientific research regarding the health impacts and put all federal 
agencies attached to the World War II efforts on notice to REMEDIATE 
continued hotspots on the Navajo Nation and to deal with this legacy of 
government sponsored uranium mining.
    I would like to express my appreciation for the Congressional 
leadership since 2007 to initiate a multi-agency, and a multi-year plan 
to address the impacts of uranium mining on the Navajo Nation. Working 
with seven federal agencies, under direct oversight of the Committee of 
Oversight and Government Reform and the Committee of Energy and 
Commerce, we are now past the mid-point of a five-year plan. There are 
a growing number of accomplishments, but one thing is evident--there is 
still a lot more work to be done to address the many issues, especially 
the need for more resources for mine assessments, cleanup, and health 
assessment projects. I look forward to continuing this important effort 
beyond the scheduled five-year term, which ends in 2012.

NAVAJO AML-CONTINUE FUNDING
    In the same vein, the Navajo Nation opposes any budget cuts that go 
to the Surface Mining Control and Reclamation Act that fund the Navajo 
Nation AML Reclamation Program. The Navajo AML projects have a 
fundamental commitment to assure the wellness and safety of the Navajo 
people by safeguarding abandoned mines and basic vital community 
infrastructure.

CONCLUSION
    The Navajo Nation believes in taking the initiative to be more 
competitive to fulfill the dynamic demands of social, economic, 
political and environmental issues. We will continue to collaborate 
with our partners and neighbors in order to accomplish all of our 
priorities for this administration.
    Aheehe', thank you.
                                 ______
                                 
    Mr. Young. I thank the total panel, and what you are saying 
is true, and the purpose of this hearing will be, and after we 
have our questions, we are going to write a piece of 
legislation, and we want to streamline it, and make sure that 
you have the opportunity for self-determination that we 
promised you.
    This idea of not being able to do things is wrong. Now, we 
will have--and I hate to say that it is going to be about an 
hour, but we have 3 minutes and 16 seconds to go vote, and you 
guys relax, and do whatever you want to do until we get back.
    And we will notify you about five minutes before we are 
going to reconvene. I want to thank the Committee, and we will 
see you later.
    [Recess.]
    Mr. Young. The Committee will come back to order. I do 
apologize to the witnesses. It is something that we can't 
control, and we had some very important votes, and so I just do 
apologize for that and in bearing with us.
    But all of the witnesses have testified, and if my good 
Members can remember what they said, I am going to recognize 
the Ranking Member at this time to ask questions.
    Mr. Boren. Thank you, Mr. Chairman. I have a few questions, 
and I am very interested by the testimony. Let me start with 
Mr. Hall. In North Dakota, and all the things that are going on 
in the Bakken Shale, in our State of Oklahoma, we actually have 
a lot of companies that are exploring natural resources there, 
Continental Resources being one of them, which is based in 
Eden, Oklahoma.
    A lot of jobs, and I noticed that North Dakota has the 
lowest employment rate in the United States. Could you tell us, 
and with you in particular, and being Chairman, what is your 
tribe's unemployment rate compared to the rest of the State?
    Mr. Hall. Congressman, we are probably at about 30 percent, 
and we have a TERO office at our tribal headquarters, and it 
stands for Tribal Employment Rights Office.
    So that office is to make sure that the Indian contractors, 
or tribal members that want to work on a drilling rig, or work 
on a production site, are getting those jobs, and then the 
training. Of course, you have to have training, and a lot of 
safety H2S, and a lot of certification, because you are dealing 
with oil and gas, and that sort of thing. So safety is really 
big, and so we are working with our Tribal College, and so we 
are starting to make a dent, but we have a way to go.
    Mr. Boren. Well, I think the Chair and I have been talking 
about how we can streamline the regulatory burden, and how we 
can work together, obviously by keeping a good environmental 
record. We want to have a clean environment.
    But we also want to give you all the tools to succeed. Mr. 
Russell, let me ask you a little bit about the ADP fees. With 
respect to that, what justification if any has the BLM offered 
to justify the disparity between off and on reservation 
drilling? And the numbers that were given to me, about $6,500 
per well, where it is much, much less on non-Indian land; could 
you talk to us a little bit about that, and what has BLM said 
to you all, the Crow Nation, the Crow Tribe?
    Mr. Russell. Thank you for the question. Beginning with the 
Fiscal Year 2008, the Appropriations Act for the Department of 
the Interior, Congress required the Bureau of Land Management 
to charge that $4,000 fee. It used to be $4,000.
    And it was to process every application for a permit to 
drill, APD, and on that appropriation, it said Federal and 
Indian lands which it supervises its oil and gas development 
activity.
    We would need an act of Congress to remove Indian lands 
from that legislation. We have approached the Bureau of Land 
Management. They say talk to your Congressman. This is 
something that most tribes here at the table have to deal with.
    And I mentioned earlier that it is a travesty of the 
system. It just is not right that you take one step off the 
reservation, and pay a hundred dollars for a test well, where 
you have to pay 6,500 dollars, and I heard that that price is 
going up.
    Mr. Boren. Well, thank you for that, and I think we are 
going to over the next few weeks and months, we are going to 
look at ways that we can lower some of those fees, or work with 
you all.
    The last question is for Mr. Shelly. Do you foresee when 
energy is a major area for development by the Navajo Nation 
going forward, and perhaps signaling a departure from 
traditional non-renewable energy development? Do you see that 
as maybe something to look at?
    Mr. Shelly. Yes, we do. We have always believed in our 
tradition and cultures when we do break ground for any 
development. There is some--well, when you say traditional 
energy, meaning maybe coal burning is what you are looking at 
asking.
    We are looking at that, and the only thing that I can tell 
you is that the Navajo Nation has a lot of coal. We have a 200 
year supply of coal. So a lot of Indian tribes, that is all 
that they have to offer, but we are also learning that new 
technology in coal is also there to produce liquid fuel from 
it.
    And we are looking at that and to do that. We want to 
explore that and then use our coal in that way, and it will 
produce fuel from it, and there are other things that you can 
make off of it, too.
    So we are looking at new things, and not sitting in the old 
way of just having coal. We are looking at other new things.
    Mr. Boren. Thank you, and thank you, Mr. Chairman, and I 
yield back.
    Mr. Young. Mr. Denham, you are up. Do you have any 
questions?
    Mr. Denham. I will yield.
    Mr. Young. Mr. Kildee.
    Mr. Kildee. Thank you, Mr. Chairman, and again I join you 
in apologizing to the panel for our break in the schedule. It 
happens around here, and I still apologize. I have a question 
for President Shelly.
    President Shelly, I would hope that we could settle all 
these issues at least as well as we did the Navajo-San Juan 
Water Settlement, which was signed last December with Interior 
Secretary Ken Salazar.
    Is there anything that we can learn from that water 
settlement that might help us guide an energy development to 
help make it less complicated and involve fewer agencies and 
fewer steps?
    Mr. Shelly. The San Juan water settlement, we went through 
a lot of problems with that. We have--it is a thing that we are 
getting a lot of conflicting--the Bureau and the Federal 
agencies have had a lot to do with that.
    We tried to provide what we want in the water settlement, 
and the water rights, but we were--there is a lot, and it comes 
right back down to that tribes are regulated and over-regulated 
in a lot of areas, and this is what we are talking about.
    There is so much red tape there that you have to hurdle all 
of that, and I think the lesson that we learned from that is 
that if we look at those policies, those Federal policies that 
hold us down, and not get what we want, and we start being 
directed toward the Federal programs, they start controlling 
it, and we lose a lot of that in that way.
    And so that is why we are expressing that there is too much 
red tape, and we need to take care of those Federal regulations 
that really hinders us all.
    Mr. Kildee. So you found that there are similar 
difficulties, both like in the water settlements and your 
energy development?
    Mr. Shelly. It is. It is the same. I believe that water is 
energy, and it is our hope that Mr. Young here considers water 
as part of the policy, because water is energy, and all the 
rest that goes along with it with oil and coal.
    So if red tape does happen, that should also be covered in 
there by the water area. Thank you.
    Mr. Kildee. I think that you make a very good point. I 
think the Hoover Dam illustrates that water is energy. 
Hydropower has been something existing early in mankind's 
development.
    So we should probably look at both these areas and try to 
see what we can do to expedite the water settlement issues, and 
energy issues then.
    Mr. Shelly. Yes.
    Mr. Kildee. Thank you very much, and I yield back, Mr. 
Chairman.
    Mr. Young. Mr. Gosar, you are next.
    Dr. Gosar. Well, thank you because we are going to make 
that point right now and tie them together. President Shelly, 
we are both very concerned about the regulatory uncertainty 
surrounding the Navajo generating station in Northern Arizona.
    The Navajo generating station is essential to the Navajo 
Nation, providing almost 500 jobs just at the station itself, 
and then an additional 400 jobs at the Black Mesa Coal Mine in 
Kayenta.
    The station is important because it is the sole source of 
power for the Central Arizona project, which provides nearly 
half of the water for the Metropolitan Phoenix area, and 
approximately 85 percent of the water for the Tucson area, the 
number five and thirty-second largest cities in the country.
    And nearly 90 percent of the water for Pinal County, one of 
the fastest growing counties in the country. As you mentioned 
in your testimony, the EPA is expected to issue a final rule on 
the Bart process in determining how that regional haze rule for 
the Clean Air Act will be adjudicated.
    As you know, this final rule could put an effective end to 
the Navajo generating station, and put the future of Arizona's 
water supply process under serious doubt. Couple that with the 
need for Los Angeles water and power to be out of the equation 
as a partnership, this provides a lot of uncertainty.
    How were you involved with the EPA process, and what hoops 
did you have to jump through, and how could you look at that 
process in a little better light?
    Mr. Shelly. Thank you for the question. I know that the 
Navajo generating station is in renegotiation with the Navajo 
Nation, and let me make a point here. It is not--what I want to 
say here in my statement is not the Navajo position.
    I cannot position a Navajo position without the Navajo 
Nation Council being involved. We are still in the negotiation 
stage, and we are still going through public hearings and so 
on.
    But let me say this. My statement will relate to Navajo 
interests. I am not stating a position, but this is Navajo 
interests, and I want to express that. Number one, Navajo 
interests.
    There are three units in the Navajo generating station, and 
two units have low NOx, sulfur, and that has been 
upgraded to that, and the third unit is being shut down to also 
upgrade the low NOx.
    But we have an issue with the USEPA. The USEPA comes around 
and says that I want the full upgrade on your emission 
scrubber, which will cost about a billion dollars, and that is 
where we get into where our differences come out.
    So the SRP are running the plant, and we have met on this, 
and the SRP and the Navajo Nation are supporting the low 
NOx, but the EPA is not. So it is a big concern to 
us because what everybody is saying is that if SRP goes with 
the higher cost of scrubber upgrade, we are in the process of 
negotiation. So it will hurt the fee for the lease that we 
would be negotiating. So it will be lower. Mainly it is just 
common sense. If they are going to spend a billion dollars, it 
will not be there for us to meet what we want for the lease 
fee.
    So that is a big concern to us. That is the Navajo interest 
that I am expressing to you. So who are the large percentage 
owners? Yesterday, we have gone to those large percentage 
owners, and which is 23 percent that is owned by the Department 
of the Interior.
    So we have asked our champion, our trustee, to stand up for 
us against the USEPA, and to stand up with us to go with the 
low NOx emission, and not what the USEPA are saying, 
the billion dollar upgrade.
    So we have asked for that, and those are what we have gone 
around with yesterday. The other one is that the grass root 
Navajos that live around the power plant also are saying that 
we really want to shut down, and we do want to shut down the 
Navajo generating station.
    But when you talk to them, the reason why they are saying 
that is because there are no improvements around that power 
plant. Believe it or not, only half a mile from the power 
plant, there is no running water, and no electricity for these 
residents. It doesn't make sense.
    I believe that as the President that I did talk to the SRP 
people on what we can do for the grass roots people around 
there, and they are willing to work with the gross roots 
residents there, and giving them water and electric.
    So that is the compromise that they made, and so there it 
is. The grass roots concerns have been resolved, and so again 
here is the thing. We also told the Department of the Interior 
that you have to create another Federal line item budget, which 
is going to cost Congress 50 million dollars a year.
    Meaning that if you shut down the Navajo generating 
station, the shareholders, that other tribe in the water area, 
will lose that funding. So this is why it is a big concern with 
the shareholders.
    They don't want to shut down, and then you go to the State 
of Arizona, and they also don't want to shut it down. So here 
we are. We have the USEPA trying to do that. So this is the big 
thing, and this is why we went to the Department of the 
Interior, and for them to stand up for us, and take a position 
here.
    And this is a big concern to us, and so the Navajo Nation 
really does not want to say anything, because we have two 
tribes that depend on that, and on their survival. The Navajo 
Nation provides coal to the generating and also the Hopi Tribe.
    The Hopi Tribe has 70 percent of their revenue that comes 
off of coal. Now, if that shuts down, the Hopi Tribe and 70 
percent of their revenue will be in jeopardy, and they will be 
hurting.
    And that is the reason why that this is the difference 
between the USEPA and our position. Thank you.
    Mr. Young. We will have another round if you wish. Mr. 
Lujan.
    Mr. Lujan. Mr. Chairman, thank you very much to you and the 
Ranking Member for calling this important hearing. Again, 
welcome to all of our tribal leaders that are here today.
    My friend, President Shelly, from the Navajo Nation, again, 
Mr. President, welcome. Mr. Chairman, I am encouraged by the 
fact that we are here to be able to have a conversation and to 
talk about real ways that we can strengthen sovereignty and to 
work with our Indian brothers and sisters from around the 
United States.
    I think that is an important dialogue that can only be 
strengthened here in the Congress, and there is no doubt that 
many of the tribes in our country are uniquely positioned to 
help our country move forward with energy production, with job 
creation, especially in areas with natural gas renewables, and 
other areas where we can see advances made.
    And as in this case with the Navajo Nation, tribes that 
have energy resources will certainly be a part of our country's 
energy future, and we will need to encourage them to develop 
energy sources safely and responsibly so that the jobs and 
revenues created lead to long-term economic stability, and not 
limit tribes to just developing one resource or another that 
are finite and may diminish.
    And that could potentially have an impact on our people. We 
have a great opportunity to work with our tribes to help them 
create jobs for their communities and becoming energy leaders 
of the future.
    And it starts by correcting problems with red tape. I am 
glad to hear that highlighted so much today. So that as we talk 
about standardizing the process so that tribes are not at a 
disadvantage, and to make sure that we have a less complicated 
and more efficient process, I believe, is what Mr. Hall 
suggested, which I think is the right approach.
    Let me give you an example. Over 90 percent of the Hickory 
Apache Nation's government, operations are funded with revenues 
from production of their oil and gas resources.
    At least three separate agencies with the Department of the 
Interior have jurisdiction over Indian leasing; the BIA, the 
BLM, and the MMS. The Hickory Apache Nation has suffered 
tremendous losses because they have not been informed of non-
compliance by operators and lessees until months or years after 
non-compliance has occurred.
    This is a result of the multiple jurisdictions and a lack 
of standardized process. When there is non-compliance that is 
restricting revenues that are yours, that belong to our tribes.
    You should be told, so that way you can collect those 
revenues, and the government has the responsibility to do a 
better job to assist you and enforcing those policies so that 
those revenues go to you to help your people, and provide that 
economic opportunity.
    This example shows how tribal nations get left behind 
because of the bureaucratic process of obtaining leases, 
permits, and there is no doubt that we need to streamline the 
process so that tribal nations can be competitive in harnessing 
the energy for their people, for the entire Nation, and for the 
betterment of our country.
    But let us not forget that we also have a trust 
responsibility to protect tribal lands from overdevelopment, 
and bad practices of the energy industry as we have seen in the 
Gulf, and as we have seen in the development of uranium on the 
Navajo Nation.
    I am proud to say that next week, I will be introducing the 
RECA Amendments, the Radiation, Exposure, and Compensation Act, 
which I hope that my colleagues will be willing to support.
    This is a responsibility that we have to workers that were 
impacted, and that have cancer, and kidney failure, and that 
generations have lost their lives because of the neglect of our 
Nation in this area.
    And it is a responsibility that we have, and it is a 
responsibility that we must make as part of any energy policy 
going forward to help our impacted workers all across America, 
but especially all across Indian Country.
    In addition, in streamlining the bureaucratic process, we 
will need to help our tribal communities train a qualified 
workforce. This year, in H.R. 1, which passed the House, and in 
a measure that I opposed, slashed funding for the Navajo 
Technical College, which is going to devastate technical 
training for energy jobs in the Nation.
    As we talk about developing energy resources, we have to 
work to make sure that we have adequate training so that you 
can have all the resources that you need to employ everyone 
that is unemployed today all across the country.
    In addition, we have a piece of legislation that has been 
introduced by Steve Pearce, a colleague of mine from New 
Mexico, with SMCRA funding, and this is an area as the 
President outlined that we have to move forward to make sure 
that we clean up areas around New Mexico and other parts of the 
country that deserve to be cleaned up so that neglect is not 
going to be part of this problem.
    Once we get to solving the Nation's problems, and 
especially problems that we have seen in Indian Country, I 
think we will be better off and helping to further advance our 
ability to do this responsibly.
    So, Mr. Chairman, I thank you very much. I look forward to 
asking a few questions in the second round, and again thank you 
for this important hearing.
    Mr. Young. We may not have a second right, and I will tell 
you that, because we are going to have votes. So remember my 
good friend that you could have submitted that same statement 
before, and there were no questions there. Thank you. Just keep 
that in mind. The good lady from Hawaii.
    Ms. Hanabusa. Thank you, Mr. Chairman, and thank you all 
for being here. I have a question, and I am going to address 
this to Mr. Russell, because you seem to have the most detailed 
testimony submitted.
    As leases are entered into, and any of the others can step 
in at any time, but as you negotiate your leases are there any 
concerns about cultural practices, or sensitivities, that your 
respective Indian Nations may have as to whether your mining, 
drilling, or any other form, water retention, anything?
    Mr. Russell. Thank you for the question. We perpetuate our 
culture by how we live it, and similar to the cultures of your 
State there, before we do anything, we offer prayers.
    We feel that all of the elements were provided to us by the 
creator to use for our benefit, and with some of the things 
that we are doing right now, we are utilizing the renewable 
energy.
    Right now, we need a lot of help from your part on creating 
laws and tax incentives to help us. I mentioned in my testimony 
that once you mention coal, it seems like it is such a dirty 
word, but it is not.
    Coal can be made clean, and we need all the help that we 
can get when it comes to coal. We need to extend the expiration 
date of the current 50 cents per gallon of alternative fuel tax 
credit for at least 10 years.
    This will give us enough time to look for more investors so 
that we can start up these major projects, but I really 
appreciate your question, especially when it comes to our 
culture.
    Like I mentioned, we live our culture, and we live in two 
different worlds. I addressed this body in my own language 
because it was the proper thing to do in my culture. Thank you.
    Ms. Hanabusa. Thank you very much, and I noticed that as 
well, and as you know, in Hawaii, we are going through a very 
similar process, especially in the alternative energy of 
geothermal, which is very much tied to the Hawaiian goddess 
Pele.
    And let me also ask you about something that you mentioned, 
which is also the need for tax credits. One of the things that 
I was wondering is that as you looked--and I believe in one of 
your testimonies, it was like 70 percent of the employees were 
really from the Nation.
    But the question is that when you have tax credits are 
benefitting from the people that you lease to, do you feel that 
it would be a good time to, in essence, increase the number of 
the Native people being hired in order to qualify for tax 
credits, or to get a higher credit some sort so that you can 
ensure as part of the lease that you get the tax credit, and 
that in fact your people are being hired, and a preference, or 
something similar?
    Mr. Russell. Yes, of course. You know, we want to hire our 
own people. With that Indian Coal Tax Production Credit, we 
need that permanent also, because we rely on it. For our tribal 
government, and in my testimony, it is written as 40 percent, 
and it is actually 60 percent and higher.
    Two-thirds of our budget comes from the taxes and the lease 
revenues from coal, and if that is taken away, I don't know 
what we will do as a government. It is devastating to us. We 
need those in place, and we need a more permanent--and I do 
agree with you that we want our own tribal members to excel, 
and we also want them to--you know, we have the caliber of 
professionals that have been working there.
    This mine has been in existence for 37 years. Our own 
tribal members are very capable of achieving the status of 
management, and we are actually shooting for that, and with the 
new projects that we have, we learn from this mine, and we are 
actually building capacity with our local school.
    We have a tribal school there, and we are actually looking 
at a total liquids plant, and something fairly new. It is so 
new that there is no curriculum for that. So we are working on 
developing that also.
    Ms. Hanabusa. Thank you. I am running out of time, but I 
did want to say, and if you could respond in writing if you 
don't have enough time, but this whole idea of the liquid coal 
intrigues me.
    And I also sit on our Armed Services, and I think that it 
was you who mentioned that we need a DoD relationship. So can 
you expand on that? Are you talking about research and 
development in the area of liquid coal as jet fuel?
    Mr. Russell. Exactly, and we need this body to grant the 
Department of Defense and other Federal agencies. We need the 
ability to enter into long-term guaranteed fixed price 
contracts.
    This will help and enable this process, and it will help 
this project become a reality. You know, we mentioned earlier 
about the 50 cents per gallon alternative fuel tax. That needs 
to be in place a lot longer than it is now.
    We need those in place so that these people will put their 
money down. This is proven technology. It has been around for a 
long time, but it is very costly, but eventually it is a win-
win situation for everybody. We could be major contributors to 
this Nation's energy crisis.
    Ms. Hanabusa. Thank you, and my apologies, Mr. Chair, for 
going over.
    Mr. Young. Mr. Denham.
    Mr. Denham. Thank you, Mr. Chairman. I have a number of 
different questions, but for the sake of time, because we are 
getting close to votes, I am going to submit those.
    But I did want to get one question out for the record. As I 
have traveled to a number of different reservations, I have 
noticed that there has been a challenge in getting large 
projects done if local governments can bond.
    Do you have the ability to bond yourselves, whether it is 
an energy project, or a community development project?
    Mr. Hall. Yes, Congress passed the--what do they call it--
the tribal renewable energy bond, TREB, and it was a 
temporary--I think it was two billion in total was for tribes 
to finance.
    Mr. Denham. And is that just for renewable energy, or is 
that for all energy?
    Mr. Hall. I need some clarification on it. I know that it 
stands for TREB, but I thought it was Tribal Renewable Energy 
Bond, because I know the acronym stands for TREB.
    Mr. Denham. And what about other development projects? One 
in particular that I visited was where they put a new ballpark 
in, but it was extremely difficult not being able to use a bond 
for it.
    Mr. Hall. Well, your point is well taken. We are trying to 
put a refinery at Fort Berthold in North Dakota, and we have 
been waiting for eight years to get EPA our ROD, our record of 
decision and permit.
    And then you get the financing, and you can't get financing 
until you get your ROD and your permit. It is more of a 
guaranteed loan. It is a limited offer, and limited support for 
that from the Department of the Interior. So, no, on the 
bonding for a clean fields refinery.
    Mr. Denham. Thank you.
    Mr. Young. Mr. Faleomavaega.
    Mr. Faleomavaega. Thank you, Mr. Chairman. I certainly want 
to commend you and thank you for your leadership. I could not 
have asked for a better Member to chair this Subcommittee in 
the years that we have worked together on issues affecting the 
needs of our Native American and Native Alaskan community.
    And thank you again for this hearing, and I always welcome 
my good friend and brother, Tex Hall, to be here this morning. 
I was interested and wanted to know, that to your knowledge, 
gentlemen, has the Department of the Interior ever conducted 
any surveys or analysis on the amount of oil and natural gas, 
or other minerals, contained on Indian lands in all the years 
that we have been together
    Mr. Shelly. No. No, they have not.
    Mr. Faleomavaega. I was wondering, Mr. Chairman, that maybe 
by way of legislation that this could be something that the 
Interior Department could do to help our tribes in this regard.
    Mr. Shelly. And, Congressman, just to add to that, but when 
you are talking about fair market value, it is hard to 
establish fair market value of your asset if you don't really 
know what you have, and how much, and how rich that natural gas 
is, or the type of crude, and whether it is sweet or sour.
    So, yes, that is really needed to establish what your 
asset, your mineral, really is worth, so that you can have the 
ability to finance and do exploration.
    Mr. Faleomavaega. I want to say to my friend from New 
Mexico to please put me on as a cosponsor of the proposed 
legislation of those victims, of the Navajo people and the 
radiation.
    I say this from my own personal experience, in terms of the 
nuclear testings that we conducted in the Marshall Islands, 
where several hundred Merciless people were exposed to nuclear 
contamination, and to this day, we still have not given proper 
medical treatment to the victims and those people who were 
exposed to nuclear radiation.
    We exploded some 6 to 7 nuclear bombs in the Marshall 
Islands, and I want to ask President Shelly, I have been to 
Kazakhstan, and I don't know if you are aware that Australia 
and Kazakhstan currently produces the vast majority of the 
amount of uranium supplied in the world.
    And I wonder if the Federal Government could do a better 
job in cleaning up the mess that we created and in harvesting 
the uranium in your lands, do you think that we still have the 
amount of reserves of uranium supply on Navajo lands to this 
day?
    Mr. Shelly. The Navajo are sitting on two-thirds of the 
finest uranium there is. We are sitting on it. And the 
cleanup--let me just say this. If you are cutting ALM money, 
that is the cleanup for all of the open pits that still exist, 
and there are over a thousand open pits that still exist on the 
Navajo Nation.
    The Navajo Nation passed a law to ban all uranium mining 
and no discussion, and that is why I stated that earlier, and 
until that is cleaned up, then maybe the Navajo Nation can 
change the law that they mandated in prohibiting mining. And 
they might change it, and sit at the table and talk about 
uranium.
    Mr. Faleomavaega. No, you said that the mess that was 
created, was it created by the companies that harvested the 
uranium, or was it by the Federal Government?
    Mr. Shelly. It was by a company that did it, and they 
disappeared. We can't find them. Nobody can find them. They are 
gone. So there it is.
    Mr. Faleomavaega. And have there been any estimates taken 
in terms of what would it would take to clean up the mess that 
they caused?
    Mr. Shelly. It is going to be an outrageous amount. I don't 
have the numbers, but like I said, there was a lot. Now, they 
took care of some open pit minds, but they are not doing enough 
of it yet. So with less funding right now, it is not happening. 
So there are still some mine openings.
    Mr. Faleomavaega. Is it possible that the tribe could 
consider the possibility of some way or somehow the technology 
and all of that? I say this because if it was possible for 
Australia and Kazakhstan to produce the majority of the amount 
of uranium supplies--we have 104 nuclear reactors in our own 
country, and I am sure that there is a need for uranium.
    And I cannot believe that you still have two-thirds of the 
reserves that have not been harvested, and I am just curious. 
With the technology and the proper review, is there some way or 
somehow that this could be done.
    I know that my time is up, Mr. Chairman, but I definitely 
would like to pursue that further with you, Mr. Russell. Thank 
you, Mr. Chairman.
    Mr. Young. I want to thank the panel. My suggestion is--and 
I don't have a lot of questions, but I would just ask each one 
of you--I know your testimony is good, and I am sure that you 
have legal-beagles around somewhere, and we are going to write 
a bill.
    And from what we have heard here today, the roadblocks, and 
what I call the two-step, and you take two steps forward, and 
three steps back. And it is really caused by the Federal 
Government.
    We know where you have not been able to go because of that, 
and so I am suggesting that when we write this bill that you 
submit what you think should be done. Personally, I would like 
to see you have the total responsibility for all your resource 
development.
    Why should we shift it through three different agencies. 
Did you say 49 different permit requirements?
    Mr. Hall. Yes, 49 steps for leasing.
    Mr. Young. Yes, for leasing, and the drain on you and for 
making it non-attractive is very evident. So any ideas on--and 
one last question for you, Mr. Russell. Did you say that they 
condemned land on your reservation to build a dam, and you have 
never been reimbursed for it?
    Mr. Russell. That is correct. Fifty-five hundred acres were 
condemned and a dam was built, and in the 50 years that that 
dam has been in existence, the government has made 600 million 
dollars.
    Originally when it was first built, I believe that they 
gave the Crow Tribe about 3 to 5 million, somewhere around 
there. Either way, it was not very substantial.
    Mr. Young. I hate to ask this question, but was that 
condemned by the Congress, or was that condemned by a utility?
    Mr. Russell. That was condemned by the Federal Government.
    Mr. Young. By the Federal Government, and the BIA did not 
say anything?
    Mr. Russell. No, apparently not.
    Mr. Young. OK. Well, we will review that. I have already 
said that Pallone is not going to ask any questions of this 
group. I mean, you can on the next one. Those that are late 
don't get any bait. But we did say you could sit here and we 
did make that perfectly clear. Yes, Doctor? I mean, Ben?
    Mr. Shelly. Chairman Young, on Monday, I will have a legal 
beaver on this, and let me ask you in front of all of the panel 
here, the Navajo Nation will take part in this, and help along.
    I think that all of us agreed earlier that we want our 
input in helping you with the bill.
    Mr. Young. And we look forward to doing that, too, because 
I say that this is a great time to raise the ability for the 
tribes to take and achieve the goals that they should.
    And you have been precluded from that by very frankly big 
daddy with his hand on your head, saying don't really get too 
far, and don't get too smart, and don't get too healthy, and 
don't be self-reliant on yourself. We will take care of you.
    And it has not worked, and this is many, many years of I 
think very poor management, and I don't blame anybody. I have 
been under eight Presidents, and 13 different Secretary of the 
Interiors. You can check it out, and the BIA is the bottom of 
the barrel.
    It always has been, and so I don't blame Echo Hawk, or 
anybody else for what they can't do. What I want to make sure 
is that you can do it at a later time, and I hope that this 
Committee will agree with me, and that we can have a great 
piece of legislation that will solve a lot of our problems.
    I want to thank the group, and if the next panel would come 
up, and you did put your hat back on, sir, and that is a good 
idea, but I usually ask you to bare your head, but you did 
good.
    Mr. Hall. Thank you, Chairman.
    Mr. Young. The next panel is Irene Cuch of the Ute Tribe of 
the Uintah and Ouray Reservation, and Michael Connolly, Laguna 
Resources Services, and Neal McCaleb, a good old friend of 
mine. So everybody take their seats, please.
    And at this time, when everybody gets settled down, I will 
ask my good friend, the Ranking Member, Mr. Boren, to make the 
introduction of his witnesses.
    Mr. Boren. Well, I wanted to say a special welcome to Neal 
McCaleb of the Chickasaw Nation. Neal is a household name in 
Oklahoma. He is also--I see him quite often, not in person, but 
on television. He stars in a lot of ads right now on the 
importance of water.
    And so we are proud to have him. He has served in the 
Oklahoma Legislature since 1974 until 1983, and in the spirit 
of bipartisanship, he was a Republican when he served there in 
the Legislature.
    He has been the Secretary of Transportation in two 
different administrations at the State level, and he has also 
been president of the Oklahoma Good Roads and Transportation 
Association.
    And he has been the director of the BIA, and so he has got 
a unique perspective; the State, the Federal, and all in 
between. He is going to talk to us, I think, a little bit about 
natural gas and what is going on with the Chickasaw Nation. So, 
Neal, welcome, and thank you for your service.
    Mr. Young. I thank the gentleman. I knew Neal when he had 
black hair, too. So I think you all know the rules. Five 
minutes. Watch that little red button, and then we will have a 
round of questions, and we will start out with, I believe, 
Irene. Irene, you are first.

STATEMENT OF IRENE CUCH, MEMBER, BUSINESS COMMITTEE, UTE TRIBE 
  OF THE UINTAH AND OURAY RESERVATION, ACCOMPANIED BY MANUEL 
      MYORE, DIRECTOR, UTE ENERGY AND MINERALS DEPARTMENT

    Ms. Cuch. First of all, I would like to say Maiku, and that 
means greetings in Ute, and Ita vite, which means good day. I 
just wanted to say this. Chairman Young, and Ranking Member 
Boren, and Members of the Subcommittee on Indian and Alaska 
Native Affairs, my name is Irene Cuch, and I am a member of the 
Ute Tribe Business Committee of the Uintah and Ouray 
Reservation, which is located in the State of Utah.
    Mr. Chairman, if Indian tribes are going to make any 
progress economically, we need to be allowed to develop our own 
resources on our own lands. The fact is that a combination of 
outdated laws, and unhelpful Federal bureaucracy, and 
environmental extremism, has served to keep Indian tribes from 
moving ahead with all manner of energy projects.
    These include wind farms, as well as coal-fired electrical 
plants. My testimony will focus on issues that are of paramount 
importance to the Ute Indian Tribe relating to the tribes 
energy development on the reservation.
    I would like to mention that I also have submitted written 
testimony to this Subcommittee, and I would like to have this 
written testimony included and made part of the official record 
of this hearing.
    By the way, I forgot, but I would like to introduce Manuel 
Myore, who is sitting next to me. He is the Director of Energy 
and Minerals Resource Department for the Ute Tribe.
    By the way of background, the Ute Indian Tribe has 3,157 
tribal members living on one of the largest Indian reservations 
in the United States, with more than 4.15 million acres.
    The tribe consists of three Ute Bands, the Uintah, the 
White River, and the Uncompahgre Bands. The Business Committee 
has six members, two representatives from each of the three 
Bands, each of whom serves a four year term.
    The tribes mineral estate is comprised of a fractionated 
checkerboard system of ownership, which makes the regulation 
and development of the Tribe's natural resources much more 
difficult.
    The Ute Tribe is one of the largest energy producing tribes 
in the United States. It is estimated that over 5,000 new oil 
and gas wells will be drilled on the reservation over the next 
15 years, involving over 4,600 different proposed surface 
locations.
    The primary source of revenue for the Tribe's government is 
revenue derived from oil and gas development, making the need 
to economically extract oil and gas resources on the 
reservation in an efficient manner of critical importance to 
the Tribe and its membership.
    The Tribe needs at least 450 permit approved by the Bureau 
of Indian Affairs each year to fully develop its oil and gas 
resources. Currently, the BIA only approves four APDs per 
month, which equates to only 10 percent of the permits the 
tribe needs to meet the needs of industry to optimize the 
development on tribal lands with energy operators.
    Our private sector energy partner routinely indicates that 
the processing and approval of permits by the agencies is the 
biggest risk factor in their entire operation on the 
reservations, and agencies current capacity limitations have 
served to cut off the revenue stream to the tribe, which limits 
the tribes' ability to provide critical services and resources 
to our tribal members.
    In the coming years the need for greater regulatory 
efficiency in the permitting process will become a matter of 
even greater importance for the Ute Tribe and other energy 
producing tribes.
    Currently, we are working with industry partners, energy 
minerals, and the Department of the Interior, to secure more 
funding and staff for tribal and BIA agencies to streamline an 
increased oil and gas permitting process.
    Other inhibitors include the split estate issue, the 
triggering of the Natural Environmental Policy Act, NEPA, 
simply by virtue of the Secretary of the Interior's review and 
approval of leases and other documents, as well as a regulatory 
gap that currently exists with regard to the Clean Air Act and 
stationary sources in Indian Country.
    In 2005 the Tribe reached agreement with the State of 
Utah's School and Institutional Trust Lands Authority, SITLA, 
that would have SITLA relinquish certain mineral interests 
within the boundaries of the reservation to the tribe and, in 
turn, SITLA would select other Federal mineral interests also 
within the boundaries of the reservation.
    Once accomplished, the transaction will unify the Tribe's 
estate in an area of the reservations that is culturally and 
environmentally sensitive, and one where the Tribe will refrain 
from oil and gas development.
    The subsurface mineral interests to be conveyed to SITLA 
will also unify its estate in an area that is already subject 
to oil and gas development.
    Mr. Young. Your light is red. You are about ready to run 
out of time.
    Ms. Cuch. OK. I have one minute, right?
    Mr. Young. No, you are one minute over.
    Ms. Cuch. OK. I am over, but I almost got it done. OK. I 
just would like to say in closing that I would like to thank 
Chairman Young, Ranking Member Boren, and Members of the 
Subcommittee for the opportunity to present these issues on 
behalf of the Tribe, and can commit to this Subcommittee 
continued cooperation of the Tribe in finding ways to eliminate 
these barriers that are preventing the Tribes and the Members 
from realizing the importance of approved standards of living 
and our hopes for our children and grandchildren. And at this 
time, I would like to say Tog'oiak', thank you.
    [The prepared statement of Ms. Cuch follows:]

   Statement of Irene C. Cuch, Ute Tribal Business Committee Member, 
          Ute Indian Tribe of the Uintah and Ouray Reservation

I. Introduction
    Good morning, Chairman Young, Ranking Member Boren, and Members of 
the Subcommittee on Indian and Alaska Native Affairs. My name is Irene 
Cuch and I am a member of the Ute Tribal Business Committee of the 
Uintah and Ouray Reservation, which is located in the State of Utah. 
First, let me say that the re-establishment of this Subcommittee is a 
development that Indian Country welcomes and will ensure Indian issues 
receive the attention they deserve. I would also like to thank the 
Subcommittee for holding this Oversight Hearing and for providing the 
Ute Indian Tribe with the opportunity to appear here today. My 
testimony will focus on issues of paramount importance to the Ute 
Indian Tribe relating to the Tribe's energy development on the 
Reservation.

II. Background on the Ute Indian Tribe
    By way of background, the Ute Indian Tribe (Tribe) has 3,157 tribal 
members living on one of the largest Indian reservations in the United 
States, with more than 4.5 million acres. The Tribe consists of three 
Ute Bands: the Uintah, the Whiteriver and the Uncompahgre Bands. The 
Business Committee has six members, two representatives from each of 
the three Bands--each of whom serves a four year term. The Tribe's 
mineral estate is comprised of a fractionated, checkerboard system of 
ownership which makes the regulation and development of the Tribe's 
natural resources much more difficult. The Tribe's reservation is 
comprised of the following types of land ownership: Ute Indian Tribe 
Land, Ute Indian Allotted Land, Ute Distribution Corporation Jointly 
Managed Indian Trust minerals, along with privately owned fee and 
federal minerals. Indian Trust lands comprise approximately 1.2 million 
surface acres, and 1 million mineral acres within the 4.5 million acre 
reservation boundary. This lack of unity between the mineral and 
surface estates is an ongoing challenge for the Tribe in developing its 
mineral resources.

III. Oil and Gas Development Crucial to Tribe's Economy and Government
    The tribal government is an important provider of services to the 
tribal members, managing 60 separate tribal departments and agencies 
including land, fish and wildlife management, housing, education, 
emergency medical services, public safety, and energy and minerals 
management. The primary source of revenue for these tribal departments 
and agencies is revenue derived from oil and gas development, making 
the need to economically extract oil and gas resources on the 
reservation in an efficient manner of critical importance to the Tribe 
and its membership.
    Energy development has long been an important part of our 
Reservation's economy. Early on in this country's history, as settlers 
migrated west and began to populate the Tribe's aboriginal areas, the 
federal government established the Uintah Valley Reservation in 1861 
and removed the three bands from their homelands in Colorado to what 
were thought to be barren lands in the Uintah Basin. But oil was 
discovered in the Basin and within the Reservation. The early 
production of oil and gas on the Reservation began in the late 1940's, 
and further development increased in the 1960's, with significant 
expansion taking place in the 1970's, 1980's and again today. A 
significant amount of conventional oil and gas deposits have been 
explored and developed, and multiple oil and gas operating companies 
are proposing to continue development of oil and natural gas resources 
across the Reservation over the next 15 years.
    Oil and gas development is important to the Tribe for many reasons, 
not least of which is because the State of Utah completely prohibits 
gaming of any kind, and the tribes in Utah do not have the gaming-as-
development option. As a result, the Tribe's primary source of income 
is from oil and gas. The measured economic success of the Tribe has 
been directly attributable to the development of the Tribe's oil and 
gas resources. The Tribe has approximately 2,500 wells that include 300 
gas wells. Ute tribal lands produce an average of 10,000 barrels of oil 
per day and we are in the process of opening up an additional 150,000 
acres of mineral leases on the reservation with an $80 million 
investment dedicated to exploration.
    To attract outside capital and to assist in the measured 
development of its energy resources, in 2005, the Tribe established the 
Ute Energy LLC (Ute Energy). To-date, Ute Energy, which is a majority 
Ute Tribally owned company, has worked with private equity and energy 
companies to explore for and develop the Tribe's oil and gas resources. 
Ute Energy has proven an valuable asset in the Tribe's development, and 
has plans to drill and operate 54 wells in 2011, with an annual capital 
budget of $216 million dollars. Through this company, the Tribe has 
taken an active role in the development of its resources and is 
investing significant capital and resources into the local economy to 
generate further development on tribal lands.
    Ute Energy has also served the Tribe in generating investment and 
operational confidence in private sector operators. As an example, in 
June 2008, the Tribe though Ute Energy teamed with the Anadarko 
Petroleum Corporation to establish a jointly own the Chipeta gas 
processing and delivery plant in the Uintah Basin.
    Using revenues from energy development, the Tribe has become a 
major employer and engine for economic growth in northeastern Utah with 
a diverse array of tribal businesses including a bowling alley, a 
supermarket, gas stations, a feedlot, an information technology 
company, a manufacturing plant, Ute Oil Field Water Services LLC, and 
Ute Energy LLC, an oil and gas development company. Our governmental 
programs and tribal enterprises employ 450 people, 75% of whom are 
tribal members. In addition, each year the Tribe generates tens of 
millions of dollars in economic activity to surrounding towns and 
communities.

IV. Indian Tribal Energy Has Enormous Potential
    As you are aware, Indian tribes throughout this country own a 
substantial amount of untapped energy resources. Energy production from 
tribal lands equals ten percent of the total federal onshore production 
of energy minerals.\1\ Indian-owned energy resources are still largely 
undeveloped: 1.81 million acres are being explored or in production, 
but about 15 million more acres of energy resources are undeveloped.\2\
---------------------------------------------------------------------------
    \1\ Tribal Energy Self Sufficiency Act and Native American Energy 
and Self Determination Act: Hearing on S. 424 and S. 522 Before the S. 
Comm. On Indian Affairs, 108 Cong. app. at 93 (2003) (statement of 
Theresa Rosier, Counselor to the Assistant Secretary-Indian Affairs, 
U.S. Dep't of the Interior).
    \2\ See id. (Statement of Sen. Ben Nighthorse Campbell, Chairman, 
S. Comm. on Indian Affairs).
---------------------------------------------------------------------------
    There are over 90 tribes that own significant energy resources--
both non-renewable and renewable in this country, and it is the goal of 
all of these tribes to fully develop these resources to provide jobs 
and incomes to their members and others, and to generate revenues to 
fund the essential programs and activities of tribal governments. 
Unfortunately, these tribes have quite often been prevented from 
realizing this goal, and a substantial amount of these energy resources 
have not been developed because of a number of comparative 
disadvantages including bureaucratic red tape, physical access limits 
to pipelines, transmission grids and the financial capital that would 
allow tribes to be equal partners in the development of their natural 
resources.
    Given the disparate impact these issues have had on reservation 
economies, the Tribe is encouraged to see that this Subcommittee is 
holding this hearing to bring attention to these issues, and hopefully 
will be proposing solutions so that tribes can move forward in the 
development of their energy resources.

V. Federal Regulatory Impediments Strangle Tribal Development
    The Tribe's success in creating economic growth has been curtailed 
by problems inherent in the federal regulatory system. These regulatory 
obstacles include delays with the Bureau of Indian Affairs' and Bureau 
of Land Management's approval of Rights of Ways and Applications for 
Permission to Drill (APDs), respectively, which serve to limit energy 
development on the Reservation.
    Other inhibitors include the split estate issue, the triggering of 
the National Environmental Policy Act (NEPA) simply by virtue of the 
Secretary of the Interior's review and approval of lease and other 
documents, as well as a regulatory gap that currently exists with 
regard to the Clean Air Act and stationary sources in Indian Country.

V1. Split Estate Issues as a Major Challenge to Energy Development
    Since statehood, the Tribe's Reservation has been checkerboarded 
with the Tribe, the state and the federal government owning various 
surface and subsurface interests. The Chairman is familiar with this as 
a similar situation exists in Alaska with the Regional Corporations 
owning the subsurface interests and the Village Corporations owning the 
surface interests.
    In 2005, the Tribe reached agreement with the State of Utah's 
School and Institutional Trust Lands Authority (SITLA) that would have 
SITLA relinquish certain mineral interests within the boundaries of the 
Reservation to the Tribe and, in turn, SITLA would select other federal 
mineral interests also within the boundaries of the Reservation.
    Once accomplished, the transaction will unify the Tribe's estate in 
an area of the Reservation that is culturally and environmentally 
sensitive and one where the Tribe will refrain from oil and gas 
development. The subsurface mineral interests to be conveyed to SITLA 
will also unify its estate in an area that is already subject to oil 
and gas development.
    This is the kind of ``win-win'' agreement that we think makes a lot 
of sense, and will also result in American energy development at a time 
when it is critical that we develop our own resources.
    Since 2006, a petition to effectuate this agreement has been 
pending with the U.S. Department of the Interior. Despite the unanimous 
support of the Tribe, the State of Utah, and Duchesne, Grand, and 
Uintah Counties, the department has failed to review or approve the 
petition, claiming it lacks the legal authority to do so.
    The Tribe and the State of Utah disagree with the department's 
legal analysis but, nonetheless, have agreed to seek a legislative 
clarification of the legal authority. On March 11, 2011, Representative 
Jim Matheson introduced H.R. 1053, co-sponsored by Representative Rob 
Bishop.
    The Tribe strongly supports H.R. 1053 and is very appreciative of 
the determination and support of Mr. Matheson and Mr. Bishop in 
pursuing this matter. We are, of course, very glad the legislation was 
referred to this Subcommittee, Mr. Chairman, where we are hopeful it 
will get a warm welcome and be expedited to the Full Committee and the 
Floor of the House.

VII. Delays in Approving Applications for Permits to Drill (APDs)
    On Reservation, there is a direct correlation between the number of 
APDs approved and the revenues that are available to the Tribe to fund 
critical government programs and services. The Tribe has experienced 
significant delay in the approval of APDs and the agency needs to be 
more diligent and effective in approving these APDs. While the BLM 
approves and issues the actual APD for each well, the BIA approves the 
necessary Right of Way associated with each APD. The Tribe has been 
made aware that BLM has 90 employees working on APD-related issues, 
including federal and Indian lands, and approves twice as many APDs as 
APD associated ROW and NEPA review at the BIA. The BIA has only four 
people working on these issues at the Uintah and Ouray Agency. As a 
result, the BIA has not been able to approve the Tribe's APD associated 
rights of way and NEPA reviews in a timely fashion.
    The Tribe estimates that it will need 600-800 Rights of Way 
Applications processed and approved each year, for the next several 
years, yet currently the Tribe's energy partners expect 200 such 
approvals or less at the current rate. Some of these applications have 
been pending for more than five years, at great cost to the Tribe. As 
these Rights of Ways and APDs languish, the Environmental Assessments 
that accompany them become outdated, which results in additional costs 
to the Tribe. Our private sector energy partners routinely indicate 
that the processing and approval of permits by the agencies is the 
biggest risk factor in their entire operation on the Reservation, and 
the agency's current capacity limitations have served to cut-off the 
revenue stream to the Tribe, which limits the Tribe's ability to 
provide critical services and resources to our tribal members.
    Put simply, the APD delays have been driving development away from 
tribal lands in favor of state and private lands with vastly lower 
associated fees. A real-world example of this disincentive will 
demonstrate my point. When oil or gas companies bring in drilling rigs 
without the necessary permits approved, the companies seek other 
opportunities and the rigs are relocated to other federal, state and 
private lands. Anadarko, for instance, needs 23 well locations approved 
per month in 2011 and beyond, but in 2010, their APDs had been approved 
at a rate of 1.7 per month.'' Operators, such as Anadarko and others, 
have indicated that inconsistent approvals of ROWs application result 
in difficult changes to operation plans and often results in 
development elsewhere, such as State and private lands. With consistent 
and reliable ROW and APD approvals, the Tribe is hopeful additional 
rigs will move on to Tribal lands and increase economic prosperity.

VIII. The National Environmental Policy Act and Tribal Operations
    Current law requires the Secretary of the Interior to review and 
approve leases of Indian land for purposes of mineral development. 
Since the 1972 Tenth Circuit decision in Morton v. Davis, this review 
and approval has been considered to be a ``major federal action'' 
triggering the procedural requirements of the National Environmental 
Policy Act (NEPA).
    As the Subcommittee can imagine, the sheer size of the Tribe's 
Reservation and oil and gas operations means that the Secretary is 
asked to review and approve a large number of leases, lease renewals 
and other business agreements related to mineral development.
    As is the case with the APD delays and other associated regulatory 
challenges, the Tribe witnesses additional delays and cost in having to 
comply with the NEPA, while energy exploration and development 
operations on private lands do not. While each of these inhibitors by 
themselves may not be fatal to tribal development plans, taken together 
they present a formidable--and almost insurmountable--mountain of 
challenges. At the end of the day, leases and other required permits 
that go unapproved or are delayed mean that tribal communities remain 
mired in poverty and poor economic conditions.

IX. The Regulatory Process Needs to be Streamlined
    The Uintah Basin is a prolific producer of oil and gas and the 
Tribe needs the assistance of the Executive Department, specifically 
the Assistant Secretary of Indian Affairs, to ensure that the 
Department of the Interior resolves these backlogs to fulfill its trust 
responsibility by retaining the necessary personnel within BIA to 
assist in the APD approval process.
    Because of the so-called ``49 steps'' the BIA has in place to 
approve energy leases and other business agreements involving many 
offices within the Bureau, the Tribe believes it would be a prime 
candidate for establishing a ``one stop shop'' to resolve these issues 
concerning the review and approval of leases and APDs, provided that 
sufficient personnel and funding is authorized and appropriated on a 
continued basis as necessary to accomplish this effort. The local BIA 
Agency would need as many as thirty-six additional staff members to 
process the 40 plus permits per month to meet our needs. In coming 
years, the need for greater regulatory efficiency in the permitting 
process will become even more urgent. Based on a survey of the Tribe's 
operating oil and gas partners conducted as part of the development of 
the Tribe's Reservation-wide EIS, it is estimated that over 5,000 new 
wells will be drilled on the Reservation over the next 15 years, 
involving over 4,600 different proposed surface locations. The creation 
of a ``one-stop shop'' designed to improve and streamline the 
permitting process would greatly benefit the Tribe by allowing for more 
efficient and effective future management of the Tribe's oil and gas 
resources.

X. Clean Air Act Regulatory Imbalance in Indian Country
    Apart from permitting and split estate issues, environmental 
regulatory issues also are of critical importance to the Tribe. Because 
the Environmental Protection Agency (EPA) has no Minor Source 
Permitting Program within Indian Country, gas compressor stations and 
other stationary sources related to energy development that would 
normally qualify as a ``minor source'' under state law and under EPA's 
own regulations applicable to BLM and other federal lands have been 
subject to much costlier and more stringent ``major source'' 
regulations for purpose of air emissions regulated under the current 
EPA regulations. This results in a regulatory scheme that is not only 
fundamentally unfair and inequitable, but which detracts from future 
energy development in Indian Country, where operators would prefer to 
locate their energy production facilities on state lands, where such 
facilities are regulated as ``minor source'' emitters not major source 
emitters. Again, this is an instance of a federally-imposed comparative 
disadvantage that works against tribal development for tribes and their 
members.
    The Tribe has objected to EPA's treatment of minor emitting sources 
as ``major sources'' for purpose of air emission regulation given the 
fact that the application of these major source regulations has created 
a significant economic disincentive for the Tribe's energy partners and 
operators to develop tribal minerals on tribal land. The application of 
these ``major source'' regulations has had a disastrous effect on the 
Tribe's energy development on the reservation, as operators instead 
choose to locate their energy production facilities on state lands, 
where such facilities are regulated as ``minor source'' emitters not 
major source emitters.
    The Ute Tribe has therefore led an initiative, in coordination with 
the Council of Energy Resource Tribes (CERT), of which the Ute Tribe is 
a charter member, and the National Congress of American Indians (NCAI), 
to secure support for EPA's issuance of this rule. This would encourage 
additional energy production on Indian reservations by essentially 
leveling the playing field for energy development, instituting a 
comparable system of environmental regulation under federal law that is 
equal to state environmental regulatory systems.
    However, the Tribes have recently been informed that EPA plans to 
issue this final rule without any further consultation with the 
affected Tribes. None of the Tribes have been provided with a copy of 
the Rule, and we are unable to determine what effect it might have on 
the course of our energy development. However, if the proposed rule 
does not allow for more efficient and productive environmental 
regulation of the air shed in Indian Country, or otherwise serves to 
replace one complex and burdensome set of air permitting regulations 
with another to the further delay the regulatory process, this rule 
will have devastating consequences to the Tribes energy development. It 
is therefore critical that EPA provide the Ute Indian Tribe and other 
energy producing Tribes with an additional opportunity for review, 
comment and input on the terms of the proposed rule prior to final 
approval and promulgation. It is the opinion of the Tribe that EPA's 
approval and issuance of this rule without further consultation is 
violative of EPA' trust responsibility to the Ute Indian Tribe and is 
inconsistent the express terms of EPA's current and proposed 
consultation policy with Indian Tribes. Many of the problems that have 
come to arise with Tribal energy development have occurred because 
Federal Regulatory Agencies to not provide proper consultation with 
Tribes, and I greatly hope that this proposed minor source rule will 
not end up as another representative example of this type of problem. 
President Obama has issued a November 5, 2009 Executive Memorandum, 
recognizing the need for these Agencies to engage in full and 
meaningful consultation with Tribes on a government-to-government 
basis, which included holding subsequent rounds of consultation in 
situations such as the present one, where there are significant changes 
in EPA's originally-proposed activity when new issues arise and in 
providing follow-up consultation giving affected Tribes feedback with 
regard to how their input has been considered in the final agency 
action.
    In closing, I would like to thank Chairman Young, Ranking Member 
Boren and members of the Subcommittee for the opportunity to present 
these issues on behalf of the Tribe and can commit to the Subcommittee 
the continued cooperation of the Tribe in finding ways to eliminate 
these barriers that are preventing the Tribe and its members from 
realizing improved standards of living and hope for our children and 
grandchildren.
    Towaok (Thank You)

UTE INDIAN TRIBAL BUSINESS COMMITTEE
    Richard Jenks, Jr., Chairman
    Frances M. Poowegup, Vice-Chairman
    Irene C. Cuch, Member
    Phillip Chimburas, Member
    Stewart Pike, Member
    Ron Wopsock, Member

    For further information contact: (435) 722-5141 or by FAX: (435) 
722-5072 Email: [email protected]
                                 ______
                                 
    Mr. Young. Thank you. Neal, you are next.

              STATEMENT OF NEAL McCALEB, MEMBER, 
                        CHICKASAW NATION

    Mr. McCaleb. Thank you very much. Mr. Chairman, and Ranking 
Member Boren, I want to thank you very much for that kind 
introduction. I am very pleased to have this opportunity to 
testify to this Committee this afternoon on the use of 
compressed natural gas in Indian Country as an alternative fuel 
for vehicles.
    I represent the Chickasaw Nation as a member of the Tribe, 
and serve as Chairman of the Board of the Chickasaw Nation 
Industries, and as a board member of the Chickasaw wholly-owned 
bank, and then as an advisor to Governor Anoatubby on economic 
development issues.
    In that respect, the Chickasaws, who are very 
environmentally sensitive, and market driven in their business 
decisions, have embarked on a program to migrate our 600 owned 
and leased vehicles from regular, unleaded fuel to compressed 
natural gas.
    We have constructed, and have operational, our first 
publicly accessible fast-fill CNG station at our fuel plaza in 
Ada, Oklahoma, and we are planning to open several more. We 
have several fuel plazas along the I-35 corridor, and along 
U.S. 70 across the southern tier of counties in southern 
Oklahoma.
    And this is being done, by the way, without any outside 
financial assistance. It is being paid for entirely by the 
Chickasaw Nation, and we are unable to take any tax credits, 
and so it is all coming out of our jeans.
    Our first car purchase was a Honda Civic, which I drove for 
a period of more than a year. That car has a dedicated CNG 
engine, meaning that it won't burn anything but compressed 
natural gas.
    And I can tell you that it gave me some operating anxiety 
and while knuckle trips, and it is a long way between CNG fast 
fill stations, and when you get to some of them, they are not 
operational.
    And when you are out of gas in a CNG vehicle, you are out 
of gas. You have just got to call a tow truck to take you to 
the next CNG station. That is because there is a limited number 
of convenient fueling stops.
    So it is far better to have a ``bi-fuel'' vehicle. That is 
a car which will burn both CNG and regular unleaded gasoline, 
so that if you run out of CNG, you have enough gas to get you 
to the next CNG station.
    Unfortunately, the Federal tax policy does not support that 
position. There is a tax credit for dedicated CNG engines, cars 
which happen to be of a foreign make, Honda. There is no tax 
credit for a bi-fuel engine, which is a lot more practicable in 
operation than a dedicated engine at this point until we get 
more conveniently located CNG stations.
    The Oklahoma tax code by the way gives a full tax credit 
for both dedicated engines and bi-fuel engines. Another problem 
is the EPA certification process, which it seems to me to be 
designed to delay and confound the process of CNG conversions, 
and it needs to be streamlined and expedited.
    We purchased last year five Chevy Impalas, and had them 
converted to a bi-fuel/CNG system that cost 10,000 per vehicle, 
but we had to wait six months after we placed the order for the 
cars before the EPA would certify the kits for the conversion.
    And finally I want to make the point that there is an 
inequitable treatment of tribes in the Federal Government's 
efforts to incentivize the use of alternative fuels. Congress 
has established a 50 cent per gallon fuel excise tax credit or 
rebate to sellers of qualified alternative fuels. Everybody but 
tribes, that is.
    The credit goes to governments--local, county, city--but 
not to tribes, and I think that is the point of this hearing, 
is that Indian tribes are left out either by exception or just 
forgotten.
    And this can be easily remedied by just adding the term 
into the appropriate legislation ``and tribal governments''. 
Again, thank you. I want to thank you and commend you, 
Congressman Boren, for the legislation that you introduced last 
year, the Natural Gas Act, which addressed many of these 
issues.
    We very much appreciate it. It is my understanding that you 
made introduce similar legislation this year, which will be in 
wholehearted support of. Thank you for the privilege of being 
here.
    [The prepared statement of Mr. McCaleb follows:]

         Statement of Neal McCaleb, Member, Chickasaw Nation, 
         and Chairman of the Board, Chickasaw Nation Industries

    Good morning. My Name is Neal McCaleb and I want to thank you 
Chairman Young and Ranking Member Boren for the opportunity to testify 
before this committee on the subject of energy policy and the use of 
compressed natural gas (CNG) in Indian country as an alternative fuel 
for vehicles.
    I represent the Chickasaw Nation as a member of the Tribe and serve 
as Chairman of the Board of Chickasaw Nation Industries, as a board 
member of its wholly owned bank and as an economic development advisor 
to Gov. Bill Anoatubby.
    The Chickasaws are very environmentally sensitive as well as market 
driven in our business decisions. We have embarked on a program to 
migrate our fleet of 600 owned and leased vehicles to CNG fuel and have 
constructed our first operational public CNG fast fuel station at our 
fuel plaza in Ada, OK. We are planning to open several more public fast 
fuel CNG stations at our fuel plazas along I-35 and US 70 in southern 
Oklahoma.
    We have been motivated to make these investments by our desire to 
provide leadership helping shape energy policy and enhance the national 
security by becoming less dependent on foreign oil. We respect the need 
to enhance air quality by reducing vehicle emissions using clean 
burning natural gas which reduces undesirable emissions including 
Nitrous Oxide--60% reduction, Carbon Dioxide--30%, Hydrcarbon--50% and 
particulate matter 90%. Natural Gas burns cleaner than any other energy 
source except electricity and if you count the carbon footprint to 
generate the steam powered electricity it burns as clean.
    As responsible businessmen we are very interested in the economy of 
using CNG especially in today's market where low octane fuel is 
currently at between $3.50 and $4.00/gallon. The cost of an equivalent 
gallon of CNG varies from $0.75 to $1.39/gallon depending on the point 
and source of purchase. My personal experience in driving a CNG Chevy 
conversion for 20,000 miles is that my fuel costs are 3 \1/2\ cents per 
mile as compared to $0.21/mile for a conventionally fueled car getting 
16 miles/gallon at a fuel cost of $3.50/gallon.
    These facts coupled with the huge and expanding reserves of natural 
gas gives a dependable domestic source that will meet the energy needs 
of this country well into the next century.
    The obvious question is ``with all these advantages and benefits of 
CNG what is holding the nation back from a transition to this clean 
burning, dependable and economic fuel for vehicles?''
    I will try an answer from the Chickasaw experience.
    First is the supply and demand relationship to the availability of 
vehicles and fueling opportunities and the demand for the fuel from 
existing operators. Natural gas vehicles are the fastest growing 
alternatives to gasoline and diesel around the world--with over 12 
million on the road. America has only about 110,000. Around the world, 
although every major car manufacturer offers natural gas models, 
currently there are no domestic original equipment manufacturers of CNG 
cars and until recently only one internationally. With a very limited 
number of vehicles on the road there is little demand for fueling 
stations that cost up to $500,000 for one pump without any site 
development expenses. This is a classic ``chicken or egg'' conundrum. 
We can't get more vehicles on the road until there are convenient and 
reliable fuel stops and the fuel stops won't be developed until there 
is a demonstrable demand.
    The Chickasaws decided to provide leadership by purchasing CNG 
vehicles and building a local CNG fuel plaza with no financial 
assistance from any one. Our first car purchase was a Honda Civic that 
has a ``dedicated '' engine meaning it burns only CNG. I personally 
operated this vehicle for a year with no small anxiety about running 
out of fuel between known fueling locations that I found sometimes were 
out of service. When you run out of CNG in a dedicated engine car your 
only option is to call a tow service and be transported to an available 
fueling site.
    In light of the limited number of convenient fueling stops it is 
far better to have a car that can be powered by either unleaded gas or 
CNG known as ``bi-fuel''. There are no original-equipment-manufacturers 
that produce bi-fuel, natural gas vehicles in the US, and the only 
viable bi-fuel cars are conversions. We purchased five Chevy Impalas 
last year and had them converted to bi-fuel at a cost of $10,000/
vehicle. We had to wait six months for the EPA to provide the necessary 
certifications for the make, model and year of the car to be converted. 
The reason there are no OEMs is that there has been no federal tax 
credits eligible for bi-fuel cars. There are for single source 
dedicated cars--but they expired on December 31, 2010. This makes no 
sense in our current environment of limited fueling opportunities. The 
more reasonable course for promoting CNG use is to have equal tax 
credits for both dedicated and bi-fuel cars as we do in under the 
Oklahoma tax code. Under these conditions there will be greater demand 
for the bi-fuel cars and subsequently more demand for new and 
convenient fuel stops.
    Secondly the EPA certification process is designed to delay and 
confound the process of CNG conversions and needs to be streamlined and 
expedited so that when new models are available the certifications are 
as well. Under existing rules, each new make and model must be 
recertified annually as well as the conversion kits. According to 
Richard Kolodziej, President of NGV America, ``currently, the EPA 
certification process for natural gas aftermarket conversion is 
cumbersome and unnecessarily costly.''
    Third, there is an inequitable treatment of tribes in the federal 
government's efforts to incentivize the use of alternative fuels, 
including CNG. Congress has established an Alternative Fuels Excise Tax 
Credit that provides a $0.50/gallon tax credit for sellers of 
qualifying alternative fuels. Tax-exempt entities such as states and 
local governments that dispense qualifying fuels from on-site fueling 
stations to vehicles are eligible for this tax credit. Tribal 
governments are not eligible. Mr. Chairman this is an issue that comes 
right to the point of today's hearing. As is so often the case in 
programs across the federal government, tribes are often simply 
overlooked and forgotten when legislation and implementing regulations 
are drafted. The Alternative Fuel Excise Tax Credit is one of the many 
expiring tax provisions that Congress takes up every year or two. This 
particular tax credit was last considered as a part of the compromise 
tax deal agreed to in December and is set to expire at the end of 2011. 
Simply inserting the phrase ``and tribal governments'' could rectify 
this inequity.
    The Chickasaw Nation is struggling to be environmentally 
responsible, sensitive to national security and economically innovative 
in its energy policy but has been frustrated by national regulations 
affecting market driven opportunities.
    A sound energy policy is one that is:
        1.  Coherent and viable (no nonsense)
        2.  Sustainable
        3.  Timely can be applied here and now
        4.  Should help not harm the national economy and the 
        environment
    We believe that, at a micro level in the Chickasaw Nation that our 
policy of using clean burning natural gas meets these criteria and we 
are implementing it with great success that can be magnified with the 
implementation of these suggested changes in tax and regulatory 
controls. It can be of greater value at a national level using the same 
criteria if the regulatory obstacles are mitigated.
    With this in mind, Mr. Chairman, I would like to commend 
Congressman Boren for his leadership last year in promoting the Natural 
Gas Act--which would have provided federal incentives for; natural gas 
vehicle purchase--both dedicated and bi-fuel; purchasing of natural gas 
fuel; and installing CNG fueling stations. It is my understanding that 
a similar NAT GAS Act will be introduced in the House shortly, which 
would also allow Indian tribes to be eligible for these incentives and 
we will be very supportive of that legislation.
    In closing let me point out that almost half of our oil consumption 
goes for on-road transportation purposes, and last year, we imported 
about 60% of all the petroleum we used. If we only substituted natural 
gas for half of that use, we would cut our oil imports by two thirds. 
Natural gas is the only available option that could actually accomplish 
this. This is not a speculative policy as 30% of European autos are now 
fueled by CNG and these countries are importers of the fuel. Most 
importantly for today's hearing, many tribal areas in the US have 
extensive deposits of natural gas, and this energy policy will provide 
economic opportunities in Indian Country by increasing demand for 
natural gas.
                                 ______
                                 
    Mr. Young. Thank you very much. Mr. Connolly.

           STATEMENT OF MICHAEL CONNOLLY, PRESIDENT, 
            LAGUNA RESOURCES SERVICES, INCORPORATED

    Mr. Connolly. Good afternoon, Mr. Chairman, and Members of 
the Subcommittee. I want to thank you for the opportunity to 
appear here today. My name is Michael Connolly. I am a member 
of the Campo Band of Mission Indians in San Diego County.
    I have served as an elected representative for the Band for 
over 17 years, 17 of the past 25 years. I am an engineer with 
over 15 years working on both Indian and non-Indian projects in 
the environmental and energy fields.
    As you have heard today, the opportunities for energy 
contributions to the national portfolio are substantial. My 
particular expertise has been in the development of wind energy 
projects, which will be the focus of my comments today.
    As you know, Indian lands represent five percent of the 
United States land base, while holding the potential of 10 
percent of the renewable resources. It is in the interests of 
Indian Country and the Nation as a whole, that these resources 
be harnessed.
    When they are harnessed, significant benefit will be 
produced in some cases for some of the most impoverished 
communities in the country, while simultaneously helping to 
diversify the United States energy portfolio.
    I am going to outline some of the basic problems that I 
have encountered over the last few years in moving into the 
development of commercial-scale wind energy projects. As you 
are all no doubt aware, there has been a recurring theme of 
resource extraction or use in Indian Country that provided very 
little or no economic gain to tribal communities over time.
    That painful legacy has only begun to change over the last 
30 years. Resources were often taken from Indian lands for 
royalty payments that were deemed fair by Federal officials, 
who had little stake in the welfare of the community.
    The end result of decades of this treatment is that tribes, 
as they have moved forward into resource development, have 
developed a fundamental mistrust of these passive types of 
deals, and they want to be owners, and they want to have a part 
of the project.
    They don't want to simply turn it over to somebody from 
outside the community to run and operate for them. This has 
become a central criterion, and in some cases, they actually 
want a majority stake in any type of energy project that 
develops on the reservation.
    Tribes are also governments, and like any thoughtful, 
reasonable government, they want to realize the full economic 
potential of a project that comes on their land. They have to 
look not only to the project and the value of the project in 
the role of an owner who is leasing their property, but also if 
they do want to buy into the project, then they are also 
entering into a relationship as a developer.
    And then on top of that, as a government, they have to look 
at the services that they need to provide to their people as a 
government, not only as to their members, but also to the 
residents, and visitors, and workers who operate on their 
tribal lands.
    So when tribes look at participating in a wind energy 
project as a developer, they face a substantial hurdle, in that 
the government incentives for these types of projects are based 
on Production Tax Credits, Investment Tax Credits, and 
Accelerated Depreciation.
    As governments, they are not eligible to use that, and so 
they are penalized. The more tribal ownership you have in one 
of these projects, the less benefit you are going to get from 
the tax credits and from the depreciation.
    In some cases that is over 50 percent of the value of the 
project, and in many cases, this is enough to kill it. Tribes, 
as governments, are also looking at the tax revenues that come 
off of these projects. And there it varies considerably across 
the country, but there are varying levels of intrusion from 
State and local governments on to reservation projects. 
Consider a 200 megawatt project on tribal lands. This could 
generate over 15 million dollars in sales tax right up front, 
which in some States, 100 percent of that goes to the States, 
and in some States, they do share that revenue back with the 
tribes.
    A one percent property tax could exceed 33 million dollars 
in value over a 20 year period for the project, and there are 
hundreds of millions of dollars in corporate and individual 
taxable income that occurs over the 20 year project life.
    So the reality is that this intrusion of State and local 
tax authorities on to tribal projects has resulted in part or 
all of the potential tribal revenue being siphoned off into 
State and local coffers.
    The result of this taxation is that many projects not only 
lose the government revenue that they should be getting to 
provide governmental services on their lands, but some tribes 
just choose not to develop the projects because of that.
    My time is getting short here. Just to give you a real 
quick example here. For my Tribe, the Campo Band, we developed 
a 50 megawatt project, and we came very close to not even doing 
it because of the tax issues that were involved.
    Not only did we have to look at tens of millions of dollars 
being siphoned off to other jurisdictions who were providing no 
services to the project area, but we also had to look at the 
property tax generation that was coming off the project going 
into the county, while we were the ones that were paying for 
the governmental services that were being provided.
    So in effect what we ended up seeing in our community was 
that the off-reservation governmental jurisdictions were 
actually making more than what we ended up getting from the 
royalty on the project.
    Fortunately, we only did a small project, and it was a way 
for us to get our foot in the door, but I think that these 
types of issues are one of the reasons why there has only been 
on commercial scale wind energy project in Indian Country over 
the last six years. Thank you.
    [The prepared statement of Mr. Connolly follows:]

             Statement of Michael L. Connolly, President, 
                     Laguna Resource Services, Inc.

Introduction
    Good morning Chairman Young, Ranking Member Boren and members of 
the Subcommittee on Indian and Alaska Native Affairs. Thank you for the 
opportunity to appear before you today to discuss this critically 
important topic for our nation as a whole and Indian Country in 
particular.
    By way of introduction, I am a member of the Campo Band of Mission 
Indians in San Diego County (Campo Band). I served as an elected 
representative of the tribe for over 17 years. I am an engineer and for 
over 15 years have worked both on Indian and non-Indian projects as an 
environmental and energy consultant. This experience has given me the 
opportunity to recognize the legal, regulatory and institutional 
hurdles Indian tribes face in trying to develop their natural resources 
and improve the standards of living of their members.
    My testimony today is to highlight the great potential for 
renewable energy development in Indian Country. As you know, Indian 
lands represent 5% of the U.S. land base, while holding the potential 
of 10% of the renewable resources. It is in the interest of Indian 
Country and the nation that these resources be harnessed. When they are 
harnessed significant benefit will be produced for some of our most 
impoverished communities, while simultaneously helping to diversify the 
energy portfolio of the United States.
    In the following paragraphs, I will outline some of the basic 
problems that hinder the development of renewable energy resources in 
Indian tribal communities and make what I hope you will agree are 
reasonable recommendations to overcome these problems.

Background
    For Indian tribal communities, the recurring theme of resource 
extraction or use with little or no economic gain to the tribal 
community is a painful legacy that has only begun to change in the last 
30 years. Resources were taken from Indian lands for a royalty payment 
that often was often deemed ``fair'' by Federal officials who had 
little stake in the welfare of the community. These raw resources then 
went to off-reservation locations where they were transformed into 
valuable products sold into the commercial markets. The end result of 
decades of such treatment is a fundamental mistrust of ``passive'' 
energy deals which simply extract resources and fail to invest in the 
long-term health of tribal economies.
    In recent years, many Indian tribes have made tribal ownership a 
central criterion for any large-scale development on their tribal 
lands.
    Tribes, like any thoughtful and reasonable government, want to 
ensure that the full benefit of economic development is maximized for 
their citizens and the community as a whole. As such, the dual role of 
tribes as owners and potential developers must be viewed in terms of 
the obligation of tribal governments to provide services like law 
enforcement, education, elder care, emergency services, environmental 
protection and the like to their members, residents, visitors and 
employees within the reservation.
    Tribes, as owners, face a substantial hurdle in that governments 
are unable to take advantage of incentives such as the production/
investment tax credits and accelerated depreciation that can represent 
over 50% of the value of a commercial scale wind or solar project. Not 
only can the unavailability of these incentives make a project 
untenable, it almost certainly makes the tribal project uncompetitive.
    Indian tribes, as governments, face an additional constraint in 
that potential tax revenues that are expected and relied on in off-
reservation projects are subject to varying levels of intrusion from 
state and local governments for on-reservation projects. Consider the 
following example: a modest 200 megawatt project on tribal lands could 
generate over $15 million dollars in sales tax (at 6%), $33 million in 
property tax (at 1%) and hundreds of millions in corporate and 
individual taxable income over a twenty-year project life. The reality 
is that the intrusion of state and local tax authorities into tribal 
projects over the last 30 years has resulted in part, or all, of the 
potential tribal revenue being siphoned off into the state and local 
coffers.
    The result of this excessive taxation of a project's revenues is 
not only the loss of revenue to fund governmental services on Indian 
lands, but the added possibility that tribes will refrain from 
developing their resources in the first instance.
    A case in point is the Campo Band. The Campo Band was the first 
tribe in the nation to develop a large scale wind energy development, 
which was put into operation in 2005. For the Campo Band, the desire to 
enter the renewable energy field was balanced against the inherent 
economic unfairness and the uneven playing field described above. The 
tribe decided that a 50 megawatt wind project would give it the 
opportunity to enter the renewable energy field, while continuing to 
work to achieve a fairer system for future projects. With a potential 
of an additional 250 megawatts, the initial project was determined to 
be a conservative first step. This was a difficult decision, however, 
as it meant accepting the fact that tens of millions of dollars in 
sales tax would be collected by state and county governments, and that 
none would be shared with the tribe. Additionally, property taxes 
(currently over $300,000) generated annually by the Campo project are 
taken entirely by San Diego County, again with none going to the tribe. 
(While Congress and the Courts have made it clear that outside 
governing bodies have no right to directly tax tribal lands, the courts 
have found that the non-Indian interests in leases of tribal lands are 
a taxable property right. While there is nothing preventing a tribe 
from developing its own property tax, the specter of dual taxation 
often makes projects economically infeasible.) When property tax is 
correlated with population, the Campo members generate a higher 
property tax per capita than the local off-reservation community. Yet, 
Campo provides the fire protection, emergency medical, environmental 
protection and other services to the project and the local community, 
without benefit of any of the tax revenues it generated through on-
Reservation projects.

Potential Remedies
    Against the backdrop of being penalized as both a developer and as 
a government, tribes are pressured into a passive lease holder 
relationship with an outside developer, the relationship that offers 
the lowest value for the tribal community and represents, sadly, a 
repeat of the historical method of resource removal and exploitation 
that tribes have fought so hard to overcome. (Typically, because of 
limited revenue, on-reservation projects have been developed by outside 
third party non-Indian developers. Because of federal restrictions on 
agreements that encumber Indian lands third-party development usually 
requires the transfer of a leasehold interest to the developer. 
Approval of such leasee requires extensive bureaucratic review, 
including but not limited to review under the National Environmental 
Policy Act (NEPA), that can actually take years.)
    A level playing field would enable tribes to benefit from the dual 
roles of developer and government. The American Recovery and 
Reinvestment Act, (ARRA) temporarily corrected a long-standing 
disparity in tribal access to capital at more favorable rates by 
authorizing tribes to issue tax exempt bonds to finance economic 
development projects. This is the kind of reform that is enormously 
beneficial and should be made permanent.
    Federal legislation to authorize the transferability of tax credits 
and depreciation allowances from Indian tribes (non-taxable entities) 
to private entities (Federal taxpayers) will further open the door for 
tribes to invest as project developers, without any loss to the Federal 
treasury.
    Federal support for tribes in their roles as governments would be 
bolstered by requiring that state and local property and sales taxes be 
justified based on governmental services provided to the project 
located on tribal lands.
    At the state level, tribes must work with the state legislatures to 
push for an equitable share of tax revenues generated from jobs and 
businesses with operations on tribal lands.
    An equally important aspect of renewable energy development is 
access to the transmission and distribution systems. In many parts of 
the country, the national energy distribution system was not engineered 
with tribal access in mind. As a result, tribes often find themselves 
at a competitive disadvantage in relation to projects sited on state or 
federal lands, offering lower cost access to the distribution 
infrastructure. Changes to the distribution priorities through reserved 
set-asides for tribal energy projects, or the use of feed-in tariffs, 
could contribute to a more equitable playing field.
    In conclusion, Mr. Chairman, while I have focused on a handful of 
the major economic constraints to realizing the full commercial 
potential of wind and solar energy projects in Indian Country, there 
are many other constraints that prevent tribes from realizing their 
resource potential. These include access to technical assistance, funds 
for initial feasibility studies, resource inventories, assessments, and 
training. Additional impediments are the secretarial leasing review and 
approval process which is lengthy and costly, the uneconomic appraisal 
requirements, and the time cost of complying with the NEPA.
    I understand the Subcommittee will be preparing the legislation to 
reform or correct these and other problems and I urge you to consider 
the observations and recommendations of the National Congress of 
American Indians which has an ongoing effort to identify and work with 
Congress and the Executive Branch to address these constraints.
    Making these simple, but significant, changes will help renewable 
energy projects to flourish in Indian Country and ultimately, 
contribute a significant element of the national portfolio.
    I would be happy to answer any questions you have at this point.
    Thank You.
                                 ______
                                 
    Mr. Young. Thank you, and if I could make a suggestion. As 
I told the last panel, you give me the exact examples of how 
that can be rectified. You write it out on what you run into, 
and how it can be done. Is it Myore, or what is your name, 
Manuel?
    Mr. Myore. Manuel Myore.
    Mr. Young. On most panels, I heard no--or no one has 
mentioned the fact that do you think that you could handle the 
leasing and the whole program, instead of going through the 
Federal agencies, could you do it?
    Mr. Myore. I believe we can. At the Ute Tribe Energy and 
Minerals Department, we mostly handle basically everything that 
is from the APDs, to the surveys. We have operators doing their 
own environmental analysis to present with the APD 
applications.
    But the only problem that we have there is the lack of 
staffing on the bureau who oversees, and looks, and reviews the 
environmental assessments.
    Mr. Young. But what I am leading up to is that I don't want 
the BIA to being a deterrent. Could you do that assessment, or 
does there have to be another assessment on the outside?
    Why do we have to have the BIA involved in this to begin 
with? I mean, that is all that I am hearing, and that is sort 
of a constant theme, is that the EPA, the BIA, the 49 different 
steps, why does that have to be there?
    Is there any reason for them to be doing what they are 
doing? There is no way that we are going to raise the BIA 
budget to the degree for this type of thing, because they are 
not producing four permits you said, and if needed, about 400?
    Mr. Myore. We do about--we are going to be looking at 400 
or 500 APD permits, but we are only getting four permits per 
month.
    Mr. Young. And that is what I am saying, because the BIA is 
not doing them, correct?
    Mr. Myore. Exactly.
    Mr. Young. So why can't you guys do it?
    Mr. Myore. I believe we can. I mean, we just need to get 
out from under the thumb of the Federal Government.
    Mr. Young. And that is what I want to do, and that is the 
whole intent of this deal. We are about ready to get out of 
time, and so Mr. Boren, you can ask your next question.
    Who has got that cell phone on? That is a good way to get 
in real trouble with me over time. I hate those things.
    Mr. Boren. I had better turn my cell phone off, Mr. 
Chairman. Let me make sure. Thank you again for being here, for 
all of you being here today. We talked a little bit about--Mr. 
McCaleb talked a little bit about the Natural Gas Act, which 
was not only introduced in the last Congress, but it has been 
introduced in the last couple of Congresses.
    We have had over a hundred cosponsors, nearly 200 
cosponsors, bipartisan, Democrats and Republicans. The first 
one that was introduced actually even had Rahm Emanuel, and in 
the Senate, Orin Hatch and Bob Menendez introduced a Senate 
companion bill.
    Let me ask you a little bit about the Natural Gas Act and 
how it would impact the Chickasaw Nation. If the bill were to 
pass, and we will be reintroducing this legislation with 
Congressman Sullivan and others, but if it were to pass, how 
would that influence the Chickasaw Nation's expansion for these 
filling stations?
    How much more investment would occur for you all if the 
bill were to pass?
    Mr. McCaleb. I think that if the bill is passed--well, each 
station costs us about $500,000. The recovery on that is fairly 
slow until you get more CNG cars on the road. So one of the 
things the bill would do, as introduced in the last Congress, 
is help us with the excise tax credit at 50 cents per gallon 
for every gallon we would pump. That would be very helpful to 
defer our capital costs.
    It would make the case for tax credits for bi-fuel cars, as 
well as CNG dedicated cars. That means that there are going to 
be more cars on the road, and more fuel consumed, and therefore 
our capital costs are retired faster.
    And, third, we are hopeful that the EPA certification 
process as provided in your bill before would have been 
expedited, and I think that is a huge deterrent for the 
increase in the number of CNG vehicles on the road.
    So I think the bill would be very helpful, and I think that 
it would increase the market, and therefore, reduce our capital 
costs. We are very supportive of those principles.
    Mr. Boren. A follow-up question on that. You mentioned the 
$10,000 cost for changing some of these vehicles over. Can you 
kind of explain the EPA's role in the after-market conversion 
process?
    And what could be done to lessen the burden to the vehicle 
owner? How can we get that cost down other than just----
    Mr. McCaleb. Well, we were told from our suppliers that 
original equipment manufacturing, which is the after-market 
converters, in Ocarta, Oklahoma, that the EPA requires that 
each year, each make, each model, be recertified.
    If you had had that same make certified in the previous 
year, even in the subsequent year, you had to get it 
recertified, even though it is the same engine, the same car, 
the same model, the same everything.
    Well, the cost of that, it is my understanding, is 
somewhere between $150,000 to $300,000. I think that we can all 
appreciate the cost implications of that. So that streamlining 
and duplication of effort on certification is unnecessary and 
costly.
    Mr. Boren. Well, I thank you for your responses. I think, 
Mr. Chairman, as we come up with this big massive bill, and 
obviously I have stand-alone legislation with the Natural Gas 
Act, but some of these things that we have learned from the 
Chickasaw Nation, hopefully we can incorporate it in a much 
larger bill.
    Mr. Young. The Gentleman brings a good point. Why in the 
world if they want clean air, why would it be a requirement to 
recertify an automobile that burns natural gas?
    I have never understood that. You know what I want to do? 
Have you ever seen these ads that they have on television now 
for anxiety, and for colds, and all this other stuff? Thousands 
of pharmaceutical ads for Viagra, Cialis, and all of that sort 
of thing?
    I want them to really take those drug companies and start 
concentrating on developing a logic pill, and every 
legislature, and everybody in government has to take one logic 
pill a day, and we would really be in good shape, because there 
is no logic in this.
    Now, one question. The car that you were talking about, 
Neal, it would have to have two tanks, right? One for regular 
gas and one for natural gas?
    Mr. McCaleb. This is a standard Impala, Chevy Impala, and 
then you get it in the aftermarket, and they would install a 
natural gas tank. So, you can run on either fuel. In fact, it 
actually starts on regular fuel, and then it switches over to 
natural gas automatically.
    Mr. Young. Well, I was just curious about how you are going 
to fill a gas tank with natural gas.
    Mr. Boren. I yield back.
    Mr. Young. Mr. Kildee.
    Mr. Kildee. Thank you very much, Mr. Chairman. Ms. Cuch, 
you said that in 2005 the Tribe reached agreement with SITLA 
that SITLA would relinquish certain mineral interests within 
the boundaries of the reservation.
    In turn, the Tribe would deal with SITLA in making similar 
arrangements. You called that a win-win situation, and an 
agreement apparently has been reached with SITLA. That has been 
pending before the Department of the Interior for quite some 
time now, since 2006, and the Department of the Interior says 
they don't have the legal authority to approve that.
    Now, it seems to me that if they don't have the legal 
authority, and I doubt that they don't have it, that Congress 
should give them the legal authority to make such agreements. 
When two representatives of sovereignties come together and 
agree on something, then the BIA or the Department of the 
Interior should be authorized to approve that, if indeed 
approval is needed. Would you care to comment on that?
    Ms. Cuch. Yes, thank you for the question. This exchange, 
and I guess it is called the Land Exchange, or SITLA, or the 
school sections within the exterior boundaries of the 
reservation, and it has been on the table for years.
    But as stated the State of Utah has agreed to make that 
exchange, and the only problem is that the Department of the 
Interior has said that they lack the authority to make this 
exchange, to approve it, and that is where it is at now.
    But Congressman Matheson did introduce H.R. 1053, and it is 
cosponsored by Representative Rob Bishop of Utah. This will 
take care of that hopefully, where this exchange will be done.
    And as I stated, it has been on the table for years. I can 
remember this going back when I was first on the tribal council 
back in 1969 or 1970. This was talked about then, this land 
exchange.
    And so it has been on the books, I guess you could say, 
throughout the years by previous council members. Some are gone 
now. So this is a dream that has been there. Hopefully Mr. 
Young, Mr. Boren, and the rest of the Committee support Jim 
Matheson's bill, and this will make that dream come true by 
making that exchange, and making it one.
    It is a primitive area, and if you take that out and it 
will be a solid tribal area, both surface and subsurface. But 
that exchange has been agreed to, except that the Department of 
the Interior has said they don't have the authority.
    So if you can support Jim Matheson's bill, then that would 
take care of it.
    Mr. Kildee. I think that the two sovereignties, and the 
State out there, and the SITLA, which is an agency of the 
State, and the Tribe, two sovereigns, have agreed, and the 
Department of the Interior should get out of the way really.
    But I will at your suggestion cosponsor Mr. Matheson and 
Mr. Bishop's bill. That is a good bill because it is a 
bipartisan bill, and to make sure that if the Department of the 
Interior lacks or does not even know its own authority, that we 
make it clear that they have that authority.
    I think that you have done a good job in negotiating with 
the State agency and in achieving what you have achieved, and I 
would support that. I appreciate your testimony. It was very 
good. I read part of it this morning, and I found it very 
revealing, and I appreciate it. I yield back, Mr. Chairman.
    Ms. Cuch. OK. Thank you.
    Mr. Young. The good lady from Hawaii.
    Ms. Hanabusa. Thank you, Mr. Chairman. Thank you to all of 
our witnesses. My questions are for Mr. Connolly. Mr. Connolly, 
I found the references in your testimony about the dual role of 
developer and government, and how somehow in that process that 
it is a disincentive for the Tribes to actually go forward with 
development of renewable energy.
    But before I go there, you did mention that the AR 
temporarily corrected a longstanding problem of accessibility 
to capital, and you wanted it to become permanent. Can you 
expand on that for me so that I can understand what you were 
referencing?
    Mr. Connolly. The ability of Tribal governments to use tax 
exempt bonds, they were restricted since the 1980s to only 
essential governmental services, and that was narrowly defined 
as basically drinking water systems, and sewerage systems, and 
things like that, that served primarily a tribal population.
    So tribes were not able to use those types of bonds for 
economic development, and in the ARA, that was expanded so that 
tribes could use it for any type of economic development, 
except for gaming.
    And the number of tribes that signed up for the bonds, both 
times with Treasury, they reserved a hundred percent, and so 
the need is out there in Indian Country for that type of access 
to capital.
    Ms. Hanabusa. Did your Tribe, the Campo Tribe, also sign up 
for bonds?
    Mr. Connolly. Yes, for another wind project that the tribe 
is looking at doing, and there was also an expansion of 
Investment Tax Credits to allow them to be used in wind energy, 
which in the past, they were only used for solar.
    And under the ARA, you could also get a grant up front for 
the projected tax credits that you would get in the future, and 
that is a very good instrument to allow tribes to try to buy 
into part of the project with their tax credits.
    Ms. Hanabusa. One of the other statements that you made 
that I found troubling is that you said that the non-tribal 
governmental entities make more money than the tribal 
governmental entities do because of all of the different taxes 
that are just sort of taken out of the system, because you are 
unable to take advantage of the tax credits, and the 
accelerated depreciation. Did I recall you correctly on what 
you said?
    Mr. Connolly. Yes, there are kind of two things there. The 
other jurisdictions are able to tax from the tribal 
jurisdiction, and it varies. Some tribes have worked out 
arrangements with the States they live in, and some of the 
States repatriate a part of the tax base back to the Tribes.
    In some cases, and I think in the State of Utah, they allow 
the Navajo Nation property tax to displace Utah property tax. 
In others, they have negotiated agreements where they share 
part of the possessory interest tax back with the Tribes.
    That is the governmental side of it, and what we have in 
California, we don't have a lot of political clout. California 
has more Indians than any other State in the country, but as a 
percentage of the population, we are so tiny that it is very 
difficult for us to change things legislatively in the State.
    We have 100 percent of the property tax, sales tax, that 
comes off the reservation and goes to the State and county, and 
zero is shared back with the tribal government, regardless of 
the level of tribal services that are provided.
    The other part of it is the Tribe as a developer. You know, 
many Tribes want to be the developer because they don't want to 
be a passive lessee to outside parties to come and work on the 
reservation.
    So they either want to raise the capital, or in some cases, 
they have tribal funds that they want to invest, but because 
over half of the project is based on the tax credits and the 
accelerated depreciation, that ownership means that they lose 
that.
    So one of the proposals that--I think it was actually 
proposed in legislation that did not get passed, but it was to 
allow transferability of the Production Tax Credit and 
Accelerated Depreciation.
    So that way when a Tribe could enter into a partnership, 
where maybe they owned 51 percent, and the private developers 
owned 49 percent, and they could transfer those tax incentives 
to the private developer in return for a larger share of the 
revenue stream. That way the project, as a whole, would be able 
to realize the full benefit, and the cost to the Treasury would 
be zero in that case.
    Ms. Hanabusa. OK. Thank you. Look at Act 221 in Hawaii. It 
generated a lot of money. Thank you.
    Mr. Connolly. Thank you.
    Ms. Hanabusa. Thank you, Mr. Chairman.
    Mr. Young. Mr. Pallone.
    Mr. Pallone. Thank you. I just wanted the Chairman to know 
that the reason that I was absent had nothing to do with the 
government. It was totally personal. I wanted to ask Mr. 
Connolly that you have used the Campo Band as an example of 
State and county governments taxing Indian energy projects.
    And I believe that State and local governments have no 
authority to tax tribal lands, and in fact, it may be 
unconstitutional. But I know that this problem has been 
complicated in some instances because of the limbo that many 
Indian lands now stand due to the Carcieri decision.
    Could you elaborate on your experience, and give us some 
recommendations on how this might be prevented in the future?
    Mr. Connolly. I understand that there has been some work 
with the National Congress of American Indians to see if there 
might be a solution administratively, and that if there are 
improvements on tribal land that they can be considered part of 
the land, and therefore not taxable by the State or county.
    These projects have such a huge capital investment that the 
property tax that they generate is just tremendous, and the 
impacts to the off-reservation community are almost nothing.
    In our case, putting in a 50 megawatt project is generating 
over $300,000 in property tax for Campo. If you divide that by 
the number of tribal members on the reservation, we are 
generating more property tax per capita than the non-Indians 
who live next to us off-reservation, and yet they are getting 
all the governmental services from the county.
    We have to pay for the fire protection, and for security, 
for roads, for environmental. All of those things, we have to 
dedicate out of our revenue stream to pay for that because our 
tax base is being siphoned off.
    Mr. Pallone. I understand and I agree with you, and the 
reason that I brought this up is because NCAI and some of the 
other groups brought it to my attention, and so I know that it 
is a problem.
    But in your testimony, you also noted that as owners, 
Tribes face substantial hurdles in taking advantage of 
incentives, such as the Production and Investment Tax Credits, 
and Accelerated Depreciation.
    Can you just elaborate on what your experience has been, 
and in your experience what has created these hurdles, and any 
thoughts that you may have on how to ensure that Tribes can 
develop their resources and pursue new projects without 
conceding control over them?
    Mr. Connolly. I did discuss that a little bit when I think 
you were out of the room, but allowing the transferability of 
the Production Tax Credit or Accelerated Depreciation would go 
a long way toward resolving that.
    And the situation that we are in right now in Indian 
Country is that we are really kind of being pushed in the 
direction of being just a passive leaseholder, because if we 
invest, then we are going to be penalized by not having access 
to the tax credits.
    But then if we don't, then the local jurisdictions get to 
siphon off the revenue stream that comes from it, because it is 
being owned by non-members. So it is really a tough position to 
be in.
    If we had the transferability, I think what we have with 
the Investment Tax Credit, and the ability to get the grant of 
the credit up front, I think is a tremendous tool that can help 
tribes there again to buy in and have an ownership in the 
facility.
    But even there, they are still going to have to have an 
official owner who is a taxable entity in order to realize that 
up front grant. So it puts tribes in this position of having to 
bring in somebody to kind of basically be the legal titleholder 
for a period of time until they can justify the exemptions, or 
the credits, and then try to transfer after that time.
    And, of course, the more people that you have in your deal, 
everybody is taking their cut, and it ends up reducing the 
profitability of the project.
    Mr. Pallone. Did you talk about expanding the Work 
Opportunity Tax Credit to Native Americans? Did you already 
talk about that?
    Mr. Connolly. No, I didn't.
    Mr. Pallone. Because that was one of the other things that 
I have heard, is that that would remove barriers to employment 
and encourage businesses to hire your members.
    Mr. Connolly. I think in the first panel, I think one of 
the speakers on that mentioned that.
    Mr. Pallone. OK. I know that the Chairman is talking about 
a comprehensive bill in this regard, and so I am sure that you 
are going to address a lot of these things. But I appreciate 
your responses, and thank you, Mr. Chairman.
    Mr. Young. I thank the Gentleman, and the same to this 
panel here. I may have some other questions, but I wanted to 
make the comment that we are going to write a bill, and I need 
your suggestions on how you think in your arena how it can be 
improved.
    The challenge that we are going to have is--and this panel 
has been talking about taxes quite a bit, and the last one did, 
too. When we write this bill, and unless I get the blessing 
from the leadership, we would have to write a bill that would 
go to Ways and Means.
    And that is not the friendliest committee right now. So we 
are going to maybe have to have two separate bills, and one 
would solve the tax part of it so that we can send it over 
there, and so they can move it, and keep the rest of it 
together.
    I have never understood one thing. A reservation is a 
Nation; is that not correct? Is that correct? It is a sovereign 
Nation?
    Mr. Connolly. Well, sovereignty can exist without a 
reservation.
    Mr. Young. OK. But what I am saying is that where in the 
world did they get the idea that they can tax an improvement on 
an reservation?
    Mr. Connolly. It has been the result of a lot of court 
cases, some very significant ones, especially in the last 20 or 
30 years that have allowed the States this intrusion into the 
Tribal tax basis.
    Mr. Young. But again though that could be changed couldn't 
it? I would like to stir the pot up. That would be fine.
    Mr. Connolly. I would like to see it addressed, and I would 
like to see the pot stirred--if for no other reason than to let 
people understand that there is tax coming off of reservation 
lands.
    There are so many people in this Nation who think that no 
taxes come from reservation lands, or that Indians are not 
taxed, and that is just not the case. As I explained in our 
case, we are generating a higher share of tax than the people 
who live off-reservation.
    And in return we are getting far, far less in the services 
that a government should be providing for those taxes. So I 
would like people just to know that, whether it went anywhere 
or not, just to educate people on the fact that this is 
occurring in Indian Country.
    Mr. Young. All right. Has anybody got any other questions?
    Mr. Boren. Just one.
    Mr. Young. Go ahead.
    Mr. Boren. Back to Secretary McCaleb. You know, having not 
only the Chickasaw Nation perspective, but the BIA perspective, 
we talked a lot about streamlining the process, and about 
improving--you know, whether it is oil and gas leasing, or 
whatever it may be, with the BIA.
    And I know that the BIA currently is involved in revising 
some of its leasing regulations right now. Are you optimistic 
that having your experience, do you see us doing this 
administratively before we get into some of this stuff?
    Will Mr. Echo Hawk have some successes, or do you see 
something like that coming about?
    Mr. McCaleb. My candid opinion is no. BIA clings 
tenaciously to the idea that anything that has to do with the 
alienation of title to land or assets of a sovereign tribe is a 
trust responsibility and cannot be delegated. That is the 
problem.
    Mr. Boren. Great, and that is the response that I thought.
    Mr. Young. And that is what I am seeking to do in this 
legislation.
    Mr. McCaleb. Excellent.
    Mr. Young. Because they have become a stagnated agency over 
the years, and they are not allowing the tribes to progress, 
and they will deny that. And I don't blame Mr. Echo Hawk. This 
is because they are at the bottom of that barrel.
    They have the Secretary, and you have the Park Service, and 
you have the Fish and Wildlife, and you have the BLM, and you 
have the Minerals Management, and way down here, Mr. Secretary, 
is you, and you have to go through all of that nonsense to get 
to the Secretary himself.
    And you have always had to take the back end of that bus, 
and like I said, I have been through all kinds of Secretaries, 
and BIA chiefs, and I just want to change that, where if they 
can't do the job, then we have to write legislation that allows 
for the streamlining of progress to let you people get on your 
feet.
    And by the way, I am going to in this bill--it is not just 
going to be gas and oil, but it is going to be wind power, and 
hydro, and all those energy sources. I think that is crucially 
important.
    We are about ready to have a vote, and I want to thank you 
all for your testimony, and keep in contact with the Committee. 
This is a bipartisan committee, and it works very closely 
together, and hopefully you will help us write a pretty good 
piece of legislation in the realm of energy and all the rest 
that we hope to put in there, and call it the Empowerment Act.
    With that, thank you ladies and gentlemen, this meeting is 
adjourned.
    [Whereupon, at 2:25 p.m., the Subcommittee was adjourned.]

    [Additional material submitted for the record follows:]

    [A letter submitted for the record by the Arctic Slope 
Regional Corporation follows:]

[GRAPHIC] [TIFF OMITTED] T5506.001

[GRAPHIC] [TIFF OMITTED] T5506.002

    [The prepared statement of Mr. Markey follows:]

     Statement of The Honorable Edward J. Markey, a Representative 
              in Congress from the State of Massachusetts

    I've been on the Natural Resources Committee for my entire 36 years 
in Congress but I have not had much opportunity to work with the 
Tribes.
    While I may be new to Indian issues, I'm not new to energy issues. 
Tribes are already making important contribution to America's energy 
supply. I look forward to working with you on ways to use energy 
development to create economic opportunities for tribes, especially 
with the vast renewable resources that exist on tribal lands. The 
Bureau of Indian Affairs has indicated to me that there are millions of 
megawatts of potential energy from wind, solar, geothermal and biomass 
in Indian country. Yet so far there is just one utility-scale wind 
project on the Campo Band's land in southern California. That needs to 
change.
    While tribal natural resources have provided crucial economic 
development to some tribes, we can't ignore the potential negative 
impacts as well. The Navajos are still suffering from the impact of 
uranium mining during World War II. The Crow have lost some their 
ancestral lands to the building of a dam. I look forward to working 
with you to pursue energy development that is both good for your 
economic development and good for the health of your people and your 
lands.

                                 
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