Making Peace Between Tribes and Energy Lords

(LANDER, WY) – After several months of negotiation, Tesoro Petroleum reluctantly agreed to most of the Blackfeet Tribe's demands for financial return and tribal control over oil development. While Tesoro officials knew they risked the wrath of other companies for setting such a precedent, they wanted Blackfeet oil and also hoped to establish a reputation that would open other Indian resources to them.

But the deal was never consummated. A week before it was to be signed, the Bureau of Indian Affairs announced an oil sale for nearby Indian lands with none of the tough conditions the tribe was demanding. Tesoro, infuriated, withdrew its offer to the tribe.

Frustrating? Confusing? Yes, but according to energy executives interviewed recently on Indian energy development, that's nothing. They launch into litanies of other obstructions to Indian energy development - tribal members challenging their tribal councils' decisions in court; the BIA forbidding tribes to negotiate contracts; tribes and states fighting over which can tax minerals; sit-ins; takeovers and threats of expropriation.

How such problems will be solved will, for the most part, be determined within the next five to ten years. A company can try to exploit the confusion of the moment, force Congress to bypass tribal decisions, or work constructively with the tribes; and indeed each tactic is being tried. Which tactic they decide to follow will determine, over the long run, how much each company will be involved in the future development of the country's largest untapped energy bank.

Along 17th Street in Denver and in downtown Houston, everyone has his own approach. An independent petroleum geologist in Denver, said, "These dumb Indians ought to be shot for not letting us dig on their land."

A regional land manager for a major company, who asked not to be identified, said, "There's no bargaining. They just jam it down your throat." Making no attempt to hide his racism, he said, "Indians don't have ambition or knowledge, even if you train them."

Such representatives obviously embarass the moderates in the industry, even though many of them still resent the tribes for being uppity, unpatriotic and for playing on the sympathies of the public for past inequities. Those businessmen who are considered the most enlightened believe the problems, though significant, can be solved through time, talking and understanding.

Regardless of their approach, the industry's decision-makers know they can't just turn their backs on Indian resources. They are familiar with Council of Energy Resource Tribes figures claiming its members own one-third of the West's low sulfur coal and half the nation's private uranium. While industry representatives say they can't check such claims, they know the Indian resources are significant.

When a tribe or the BIA seeks developers for Indian minerals, the companies rush to be the first in line. While they grumble about the restrictions, their actions speak louder. As Gary Taylor of Getty Oil puts it, "We wouldn't choose the North Slope in Alaska either, but we go where the oil is."

Consequently, many company representatives listened attentively at a recent conference in Phoenix when Kirk Blackard of Shell Oil Company gave pointers on how to deal with tribes. Last spring, Shell successfully concluded five years of negotiation for a 2,560 acre coal contract with the Crow Tribe in Montana.

Those five years were traumatic for both the company and the tribe, whose tribal government has been the most unstable in the West. The tribe had sued the company in 1975 for an inequitable and illegal contract signed in 1972. In its attempt to renegotiate the contract, the company insulted the tribe by sending each Crow family a letter promising a bonus of $200 to each tribal member before the Crow Fair if a new contract were signed.

Then two factions of the tribe battled over who was authorized to represent the tribe in coal negotiations, ousting one tribal chairman twice in a year.

However, Blackard mentioned none of this turmoil in his talk at the Federal Bar Association conference last April. Instead he outlined three problem areas that he said were peculiar to negotiating with tribes: cultural differences, lack of credibility and lack of expertise. Considered one of the more enlightened company representatives, Blackard made it clear that he wasn't blaming the Indians or the companies. "Neither party was as appreciative of the other's culture as it could have been," he said.

As Blackard sees it, the Indians' culture encompasses such things as sovereignty and reverence for the land while the "corporate culture's" values include the need for making acceptable profits and taking only acceptable risks.

"Basically what we used, whether voluntarily or involuntarily, was a lot of talking. When we sat around the table for hours and hours and for days and days, we began to understand their views and they ours," Blackard said.

Credibility, which was a big problem fo both Shell and the tribe, also took time - just as it takes time for two individuals to learn to trust each other, Blackard said.

By expertise, Blackard was referring to negotiating skills. "It may sound funny coming from me, but negotiations progressed much more smoothly when the tribe gained expertise," he said. He believes the tribe at first had unrealistic expectations, which caused both parties to take extreme positions. Then CERT advisors started working with the tribe. While CERT has been accused of being too uncompromising in negotiations on another reservation, in this case Blackard believes the organization's involvement helped. "From then on we made slow but continual progress," he said.

Other corporate executives who have given much thought to improving Indian-industry relations generally perceive the same barriers as Blackard, although they expressed them somewhat differently. They added water rights to the list. Most tribes have not quantified their own domestic and agricultural needs so they are reluctant to relinquish much water for industrial development. They are battling states over how much water they will get and who issues permits to non-Indian users on the reservations - questions that aren't likely to be settled for years.

Jerry Bathke, formerly of the Department of Energy and now the Atlantic Richfield (ARCO) director of Indian affairs, believes the government's expertise must improve, too, before development can proceed smoothly. The government only began mineral inventories on reservations in 1976 and still cannot tell most of the tribes the value of their minerals. As one BIA official said, "The tribes are way behind the companies in negotiations from the start."

The Bureau only now is opening a technical resource center in Denver and hiring mining engineers, petroleum engineers, economists, geologists and accountants to serve the tribes.

The tribes have been acquiring more expertise in negotiations and moving into new, innovative mineral agreements. But BIA officials have found many barriers to this trend, while saying they support it.

Critics of the BIA point to the Tesoro-Blackfeet situation as an example, saying the BIA thwarted the tribe's negotiations because agency officials are jealous of CERT's successes. BIA officials denied this, however, saying the tribe was not close to finalizing a deal and was making promises for lands over which it had no authority.

While Interior Department officials say they agree with the concept of alternative contracts and have been approving some such contracts, statutes have not been changed to allow them - much to the energy companies' consternation.

Belco Petroleum, for example, recently sent a letter to the department asking it to clarify the rights of the N. Ute Tribe to negotiate contracts. Until Belco gets a satisfactory answer, the tribe's and Belco's efforts are stymied. ARCO was faced with a similar problem after completing several months of negotiation with the Northern Cheyenne Tribe in Montana. In September ARCO met with Interior officials and agreed to assume the financial risk of legal action if the department would not block the contract.

Several companies, in fact, say development could proceed more quickly if the tribes had more control. Both Exxon and Consolidation Coal spokesmen pointed out that the Navajo Tribal Council approved each of their projects several years before the federal government. The Interior Department was concerned that Exxon planned uranium exploration on 400,000 acres, which is more than federal regulations allow, and that Consolidation's coal mine site near Burnham, New Mexico could not be reclaimed.

Consolidation Mine Superintendent Marcus Wiley said, "Tribal sovereignty could be an advantage if there were no involvement from the federal government…. The problem is not having it defined." While several Navajos filed a lawsuit to halt the mine and have staged protests at the mine site, the tribal council had continued its support of the project. "If they had been sovereign, we would have been in business three years sooner," Wiley said.

A representative of Palmer Oil, which recently sold its wells to the Jicarilla Apache Tribe in New Mexico, reaffirmed Wiley's position: "The biggest problem is government roadblocks. When we were working directly with the tribe, everything was easier."

Overall, Bathke of ARCO believes Indian energy development has become easier in the past five years. "In the past, there has been very little acceptable relating between the tribes and industry," he said. Now they realize they need each other. "Business has the technology and the capital the tribes need; and the tribes have the people, the spirit and the resources.... From now on, Indian energy development is going to be increasingly creative and exciting," he said.

Not everyone sees it that way, of course. While not mentioned by Blackard or Bathke, one of the biggest barriers to Indian energy development is that many companies are reluctant to consider contract innovations. They prefer the standard BIA lease that was used for decades with firm royalty rates and strictly limited tribal controls. "Without question we favor those," said John Brock of Tesoro Petroleum. "However," he said, "we'll look at anything that makes money."

Consequently, Tesoro representatives remained seated at the Blackfeet negotiating table when other companies walked out. Before the agreement was scuttled, Tesoro agreed in essence to 18 points that the Blackfeet Tribe developed with assistance from CERT, including profit sharing, employment preference, advantages to Indian contractors, money for training and education programs and tribal involvement in development decisions throughout the production period.

Ernest Stevens, director of economic development for the Navajo Tribe, interviewed the 20 biggest companies active on that reservation. He found that when he explained many of the energy contract ideas the Navajos are now considering, the companies' representatives were not hostile. The concepts, it seems, frightened them more than the realities.

"Many of them were puzzled and concerned. They had seen articles in the newspapers and heard proclamations but never talked with us about what it all meant," he said.

Ironically, Stevens, a member of the Oneida Tribe, who has been involved in Indian economic development for 12 years, has fueled the fears: He has been known to tell a room full of Exxon, Peabody and ARCO attorneys that he advocates tearing up contracts that aren't fair. When asked about that, Stevens said he still thinks overstatement is a valid tool to give the tribes a starting point in bargaining. However, he said, the Navajo tribal leaders do not agree with him and have no plans to move unilaterally against the companies.

Stevens is now asking the companies holding leases on the reservation if they would consider selling them to the tribe. If the companies are not interested, he tells them the tribe wants first option when they do sell. "We are determined and ready to operate in a hard, businesslike way. But we are responsible," he said.

Some energy executives say they fear tribal sovereignty because they think tribes wouldn't have to abide by federal law or honor contracts signed by the Secretary of the Interior. Stevens said, however, that sovereignty disputes usually involve states' v. tribal rights; tribes are saying their powers are similar to states' and that their reservations are not subject to state regulation.

When companies are afraid of tribes imposing new taxes and regulations, Stevens said the tribe is willing to make it clear in written agreements just what the tribe will and will not do.

Some contracts signed just recently in the West illustrate Stevens' point; bugaboos such as sovereignty can be dealt with to both the tribes' and the companies' satisfaction. Both the Tesoro-Blackfeet and the Shell-Crow agreements, for example, specified that disputes would be handled by arbitration boards selected by both parties and not by tribal courts or state courts. Shell also agreed to pay the tribal severance tax - if the Crow win their suit to block a state severance tax on tribal coal.

While industrial-tribal relations can be improved by such one-to-one contacts, there is a growing movement toward improving communications on a grander scale. Equitable Insurance Company recently hosted two seminars in New York City designed to bring tribal leaders together with energy and financing experts. Bruce Rockwell, president of Colorado National Bank, hopes to conduct similar seminars in the West. Rockwell said, "I'm not a Pollyanna. I know there are a variety of attitudes out there. Some of the energy companies are in the Dark Ages, and they're just not going to get a deal with tribes." Recognizing that Indian energy development is a highly charged emotional issue, he believes, nevertheless, that both the tribal and the industrial representatives could benefit from candid discussions at a seminar.

Working closely with CERT, Rockwell heads an effort to raise $150,000 from corporations to alleviate the severe shortage of Indian engineers, scientists, mathematicians and business managers. He is also interested in starting a "loaned executive" program through which tribes could gain expertise in business management. "Tribes can decide if they want to develop or not, but if they do they must know what kind of ball game they're in," he said. "I hope in time tribes will become independent of all outside expertise."

Of course, many of the problems between industry and Indians cannot be solved through communication and education. Some Indians feel a fundamental distrust of corporate America that is rooted not just in treaties broken a century ago but also in relatively recent abuses: 17 cents a ton coal contracts; unventilated uranium mines that led to many cancer deaths; unreclaimed mines; discriminatory hiring practices; bribes to tribal officials; and doctored accounting books that cheat tribes of royalties.

The more radical traditionalists oppose any development of nonrenewable resources, and others just want the tribes to be in charge, eliminating reliance on corporate consciences as much as possible.

While Stevens of the Navajo administration, for instance, believes communication helps, he doesn't think the cultural conflict over corporate profits is based on the tribes' ignorance. Tribes certainly understand that profits are necessary; they disagree with the corporate perspective on what is an "acceptable" profit. "Some of the same companies that stonewall us have much better agreements with Third World nations," he said.

Under the new Navajo energy development policy, the tribe will be moving away from being just a mineral owner and toward being the developer. For example, rather than signing a lease that transfers coal to a company in exchange for a 12 percent royalty, the tribe will hire a firm to mine the coal. Expertise can be bought, Stevens said. "I can overnight become the best coal mining operator in the country just by hiring the best coal mining company," he said.

The Jicarilla Apache Tribe in New Mexico recently became the first tribe to implement this philosophy when they bought out Palmer Oil. The company wanted to sell its oil facilities on the reservation because it had already sold its other wells. Richard Tecube, vice president of the tribe, said a tribe can develop, produce, transport, process and market resources themselves. But he emphasized they should take their time to be sure they are prepared. "There may be pressure to hurry from the companies, from within the tribe and from the federal government, but we should not be rushed into these deals," he said.

Clearly time is the key to how Indian energy development will proceed. The tribes need time to complete their mineral inventories, enact taxes and environmental ordinances, and improve their enforcement programs. Some tribes will also have to scrutinize their government structures to find ways of becoming more responsible to the development attitudes of their members. The schools need time to turn out more Indian economists, accountants, geologists, engineers and biologists. Government officials must improve the regulatory framework. And industry needs time to gain understanding of Indian values and to overcome its resistance to the tribes' new development criteria.

However, as Tecube points out, the pocketbook pressures of impoverished tribal members and the country's current crisis mentality force tribes to feel they must proceed, ready or not.