[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
U.S. GOVERNMENT PRINTING OFFICE
65-506 WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected].
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.