MERRION v. JICARILLA APACHE TRIBE
Legal provision: Article 1, Section 8, Paragraph 3: Interstate Commerce Clause
ORAL ARGUMENT OF JASON W. KELLAHIN, ESQ., ON BEHALF OF THE PETITIONERS MERRION AND BAYLESS
Chief Justice Burger: We will hear arguments next in Merrion & Bayless v. Jicarella Tribe.
Mr. Kellahin, you may proceed when you are ready.
Mr. Kellahin: Mr. Chief Justice, and may it please the Court:
This case is here on certiorari to the 10th Circuit and involves the power of an Indian tribe to tax non-Indians locally on the Indian Reservation.
The facts of the case are quite simple.
The Jicarilla Apache Tribe is an Indian tribe occupying an Executive Order Indian reservation located in the northwestern portion of the State of New Mexico.
It is organized under the Indian Reorganization Act and in 1968 it adopted a constitution which purported to confer on the Tribal Council authority to impose a tax on non-Indians.
It must be remembered that petitioners here were on the Indian Reservation under valid oil and gas leases issued pursuant to federal law, signed on behalf of the Tribe, and approved by the Secretary of the Interior.
Some of these leases dated back to the early 1950s, long before the adoption of the Jicarillas' severance tax.
The petitioners brought suit in the United States district court and the district court held the tribal ordinance imposing a severance tax on oil and gas severed, saved, and removed from tribal lands, which was adopted in 1976, the district court held that ordinance unconstitutional, illegal, invalid, and void, and restrained the Tribe from enforcing it.
The court of appeals in a five-to-two decision reversed, holding that the power to tax was an attribute of inherent tribal sovereignty, since no treaty or Act of Congress authorized it.
They held that it did not violate the Commerce Clause and that the power to tax had not been preempted by the Federal Government.
That raises these questions here: did the Jicarilla Apache Tribe retain as an attribute of its inherent sovereignty the power to impose a severance tax on oil and gas extracted from trust property on its reservation?
Has Congress divested the Tribe of such power by permitting the state to impose a tax on this same production, and by adopting a pervasive system of federal regulation of oil and gas production and sale on reservation lands?
Justice Rehnquist: Mr. Kellahin, is the Jicarilla Tribe a treaty tribe?
Mr. Kellahin: No, sir.
There is no treaty involved.
Justice Rehnquist: And it was not within the boundaries of the United States until the Mexican cession?
Mr. Kellahin: That is correct.
Justice Rehnquist: The Treaty of Guadalupe Hidalgo?
Mr. Kellahin: That is correct.
That is discussed at some length in Chief Judge Beth's dissent in the 10th Circuit.
The State of New Mexico... or the Territory of New Mexico, I should say, which included most of Arizona and Southern California, came into the United States under the Treaty of Guadalupe Hidalgo and under the late Corporation of Jesus Christ of Latter-Day Saints case it was held that the only sovereign that existed as of that date was the United States and that all other sovereignty was derived from that source, which... seriously... poses a serious question on the doctrine of inherent tribal sovereignty in this particular case.
There was never any treaty entered into with the Jicarilla Apache Tribe although several efforts were made to do so; none was ever signed and approved by the Senate.
In connection with this situation I would like to discuss the issue of tribal sovereignty and my colleague will discuss federal preemption and the Commerce Clause issues in this case.
The 10th Circuit opinion recognized the case presented an issue that had not been passed upon by this Court and pointed out that this case presents the bald issue of an Indian tribe's taxing power without benefit of reservations of authority in a treaty, since no treaty or Act of Congress authorizes the exercise of such taxing power.
The court then reached the conclusion that the right to tax was an inherent aspect of the tribal sovereignty, and with that background it is necessary to address the nature of this sovereignty.
As I said, these petitioners were already on the reservation under valid oil and gas leases issued pursuant to Act of Congress.
The leases stated the conditions under which the petitioners could enter the reservation and the conditions that would permit them to remain.
The power to tax was not reserved as a condition of the leases.
So what we have here is a unilateral modification of a contract by way of taxation which the 10th Circuit upheld.
The concept of Indian sovereignty relied on by the 10th Circuit has had a long and somewhat troublesome history and an examination of the cases, especially the most recent, shows that the Court does not recognize the broad definition of inherent sovereignty that was relied on by the 10th Circuit and supported by respondents in this case.
Rather, tribal sovereignty has been restricted by the tribes' dependent status, and the most recent case to address this issue was Montana v. United States, which was decided on March 24.
Montana v. United States clarifies the scope and extent of tribal sovereignty and makes it abundantly clear that sovereignty extends only to the right of Indian tribes to make their own laws and be governed by them, to protect the integrity of their tribal lands from encroachment, and to protect their tribal government from outside interference.
That is the tenor of all of the cases that have been ruled on by this Court.
Tribal sovereignty does not extend to nonmembers of the tribes.
In Montana v. United States it was held that the exercise of tribal power beyond what is necessary to control the internal relations of the tribe is inconsistent with their dependent status, and so cannot survive without the express delegation of authority by Congress.
The case clearly holds that the same lack of tribal authority to try non-Indians for criminal offenses as was found in Oliphant extends as well to the civil jurisdiction, and in discussing the extent of civil jurisdiction retained by the tribes, this Court touched on the very issue that is raised in this case.
It pointed out that the Indian tribes retained inherent sovereign power to exercise some forms of civil jurisdiction over non-Indians.
The Court then explained, however, that a tribe may regulate through taxation, licensing, or other means the activities of nonmembers who enter into consensual relationships with the tribe or its members through commercial dealings, contracts, leases or other arrangements.
In support of this conclusion the Court cited Williams v. Lee, Morris v. Hitchcock, Buster v. Wright, and Washington v. the Confederated Tribes of the Colville Indian Reservation.
Both Morris v. Hitchcock and Buster v. Wright were relied on by the 10th Circuit in its conclusion that the tribe had inherent sovereignty to impose this tax.
However, these were both clearly cases based on the right of the tribes to exclude nonmembers and to attach conditions on their right to enter onto the reservations.
This was reasserted in the Court's decision in Colville.
In the recent Montana opinion it was pointed out that the tribe can impose conditions on those who might choose to enter the reservation lands, the Indian-owned lands, and hunt and fish by imposing fees or establishing bag limits.
The analysis of tribal rights over non-members in the tribe was discussed in Montana v. United States and is applicable to our case.
Petitioners entered into a consensual relationship with the tribe.
A contract which imposed the conditions of their entry and fixed the conditions for them to remain, that the royalties would be paid and provided that the rents and royalties could never be increased.
Taxation was no part of that contract, nor did the petitioners ever consent to taxation of that production.
In Colville the Court in upholding the right of the tribe to impose a tax on nonmembers coming onto the reservation to purchase cigarettes cited an opinion by Solicitor Marigold in 1934 where the Solicitor pointed out that except where Congress has provided otherwise the power of taxation may be exercised over nonmembers so far as such nonmembers may accept privileges of trade, residence, and so forth, to which taxes may be attached as conditions.
Justice Rehnquist: Colville dealt with a treaty tribe, did it not?
Mr. Kellahin: Yes, sir.
That is correct.
And the Court found in the Colville case that the treaty did permit the tribe to exclude non-Indians.
In an Executive Order Indian reservation, however, under the Indian Reorganization Act, it has the same right to exclude nonmembers from tribal lands so long as they are held in trust for that tribe.
They have control over their tribal lands although they do not own them.
In Colville this Court also pointed out that those who come onto the reservation to buy cigarettes are free to go elsewhere and avoid the taxation.
Here, in this case, we cannot go elsewhere, we cannot pick up our mineral interests and move away.
The Court in Colville recognized that the relevant treaties can be read to recognize inherent tribal power to exclude non-Indians and it upheld the tax on that ground.
This is wholly consistent with the prior cases relating to Indian taxation and relied on in Colville and in Montana v. United States.
The result does not require a finding of governmental sovereignty such as is sought to be asserted here.
Under the ruling in Colville it is argued here that the tribe has a significant interest... the language used in the Colville decision... in the subject matter enabling it to impose the tax.
We do not deny, of course, that the tribe has a significant interest in its tribal lands and what occurs there.
But the tribe's interest, insofar as this case is concerned, has been assigned for the term of the lease and the conditions under which the petitioners are entitled to remain was spelled out in both leases, and the tribe retains no significant interest which would justify the tax in this case as was the situation in Colville.
Any remaining interest would not support that conclusion.
Now, in Oliphant, which is discussed at some length in our brief, the pattern for assessment of Indian tribal sovereignty was established.
As shown in Wheeler, Montana v. United States, Oliphant, the Indian tribes have lost a portion of their sovereignty by virtue of their dependent status.
Under Oliphant the tribes may not try non-Indians in tribal courts.
Under Montana tribes cannot exercise civil jurisdiction over non-Indians in the same sense as the Oliphant case.
And Oliphant reasserts the limitation of Indian sovereignty as applying only to the tribe and its members and not to non-Indians.
This was followed in Colville and in Montana.
Oliphant, as interpreted in Montana v. United States--
Chief Justice Burger: You may resume there, counsel, at one o'clock.
Mr. Kellahin, you may continue.
Mr. Kellahin: --Mr. Chief Justice, and may it please the Court:
In response to questioning I may have left the inference that I considered the Colville Tribe a treaty reservation, as occupying a treaty reservation.
That of course is not the case.
They reside on an Executive Order Indian reservation.
But as I tried to explain, in my opinion that does not affect the right of the tribe to exclude non-members from tribal property and that is the sole right that they have to enforce a tax against non-Indians.
Now, very briefly, I would say that after a tribe has negotiated for, obtained, and its guardian has approved oil and gas leases which set forth the rents and the royalties to be paid to the tribe, it cannot rationally be contended that the tribe reserves thereafter the right to retroactively impose a tax on those non-Indians who are there under the provisions of that lease.
I say retroactively only in the sense that the contract had already been negotiated and the imposition of the tax is a change in that contract.
To allow the tribe to take a captive lessee, one who cannot pick up his mineral interests and move them off the reservation is to allow it to rewrite the terms of entry by imposing potentially prohibitive taxes on that lessee.
For that reason we submit that the opinion of the court of appeals should be reversed.
If I have any remaining time, I would reserve it for rebuttal.
Chief Justice Burger: Mr. Cooney.
ORAL ARGUMENT OF JOHN R. COONEY, ESQ., ON BEHALF OF THE PETITIONERS AMOCO AND MARATHON
Mr. Cooney: Mr. Chief Justice, and may it please the Court:
I represent the petitioners in No. 80-15.
Our argument will be that the Commerce Clause will not permit this new tribal severance tax and that Congress in 1927 by enacting 25 United States Code Section 398(c) preempted any power of the tribe to impose the tax.
Justice Rehnquist: In your Commerce Clause argument, the first part of your argument, counsel, I take it that would apply to a state as well as to a tribe?
Mr. Cooney: Yes, Your Honor, we submit that the negative implications of the Commerce Clause restrain the powers of Indian tribes who would attempt to impose the powers of taxation or regulation over commerce similar to those currently imposed by states or municipalities.
Justice Rehnquist: Haven't severance taxes on extraction of minerals from the ground long been a source of income for states?
Mr. Cooney: Severance taxes have been, and particularly with reference to Executive Order Indian reservations and other Indian reservations.
Justice Rehnquist: Quite apart from Indians?
Mr. Cooney: Yes.
New Mexico, for example, has imposed severance taxes.
Justice Rehnquist: Don't most of the western states?
Mr. Cooney: Most of the western states.
Our Commerce Clause argument, Your Honor, rests not so much on the fact that a severance tax exists but that this Jicarilla severance tax is discriminatory, that it is imposed by the fashion in which it is drafted directly upon commerce, and that it imposes in addition with the tax imposed by the state a multiple burden upon commerce.
We do not attack the validity of a severance tax per se, but simply submit that the Jicarilla Tribe may not impose such a tax in this case because Congress has divested that power, and that in addition when added to the state tax it creates a multiple burden.
Justice White: Isn't the tribe the lessor in these cases?
Mr. Cooney: Yes, Your Honor, it is.
Justice White: And it's collecting the royalty that's reserved?
Mr. Cooney: The royalty and the bonus and the rental, all of which produce considerable income to the tribe.
Justice White: And does it get paid in money or in kind or both?
Mr. Cooney: It may take its royalty in kind, it may elect to do that; or it may take the money.
To date it has taken the money.
Chief Justice Burger: When they negotiated the lease, COULD THE tribe have written in the provision for the functional equivalent of this tax, in other words, call it whatever you want?
Mr. Cooney: Mr. Chief Justice, but for the provisions of 25 United States Code 398(c), which we say divests the tribe of any power to impose a tax on production, they could.
Chief Justice Burger: Well, let's say they didn't call it a tax.
I didn't make my question very clear.
They called it something else: bonus, profit-sharing... they could have written any provision they wanted in terms of dollars, couldn't they?
Mr. Cooney: Any provision that they wanted in terms of dollars that would be acceptable in the marketplace to a potential lessee and that would be approvable by the Secretary of Interior.
But any tax that is imposed on the production or on the assets or equipment or activities of the lessee would be preempted by Section 398(c).
Chief Justice Burger: What you're suggesting is, the tribe is trying to collect a royalty and these other factors and then another royalty in the guise or the form of the tax?
Mr. Cooney: Precisely, Mr. Chief Justice.
That is exactly what the tribe is attempting here to do.
Justice White: Well, what's the discriminatory... give me your discrimination argument, who does it discriminate against?
Mr. Cooney: It discriminates against any oil and gas production which is not transported or sold off the Jicarilla Reservation.
Justice White: Is there any?
Mr. Cooney: There is none at the present.
There is the announced intention of the tribe to use gas retained on the reservation for industrial and agricultural purposes.
Justice White: You mean, it might take its royalty in kind?
Mr. Cooney: It might take its--
Justice White: And then use the gas for its own purposes, maybe?
Mr. Cooney: --Or it might sell that gas to other industries, such as it plans to do on the reservation.
And it might also permit producers to locate on the reservation--
Justice White: But right now there's no discrimination, no actual discrimination that you can identify?
Mr. Cooney: --None at the present time.
Under the Nipper case, Your Honor, we believe that the potential for discrimination is certainly to be considered by the Court in passing upon the merits of the tax.
We also admit quite freely that the tax ordinance here could be amended easily to apply only to severance of all oil and gas which is produced on the reservation--
Justice White: And I suppose that if the tribe wanted to take its royalty in kind and sell it or use it and it cost any money, they might get some, they could even get congressional approval for it, in which event you wouldn't have any case on discrimination.
Mr. Cooney: --None on discrimination.
Justice White: But I agree, maybe on some other ground.
Mr. Cooney: As it's presently drafted, we have a case on discrimination, and as the tax is presently drafted we have a strong case on the tax being a direct tax on commerce under Michigan, Wisconsin.
This tax is not a tax on severance of the oil and gas.
It is a tax only on transportation or sale of the gas off the reservation.
It is not apportioned according to the length of the pipeline facilities on the reservation nor to the volume of business conducted there.
And under the precise test of Michigan, Wisconsin, very clearly this tax taxes directly an integral portion of commerce and therefore cannot be sustained.
But that, like the discrimination problem, can be amended away by the ordinance being amended to apply only to the severance of all oil and gas which is severed on the reservation.
Justice Rehnquist: Then you're saying that in effect the state could not impose this tax either?
Mr. Cooney: No, Mr. Justice Rehnquist, we're saying that the state has the power granted by Congress to impose the tax that it now imposes, which applies to the severance of all oil and gas within the State of New Mexico and not just to oil and gas within the State of New Mexico that is then transported or sold off the state--
Justice Rehnquist: What authorization is that that the State of New Mexico must rely on to impose a tax of?
Mr. Cooney: --Your Honor, the state might have that authorization absent specific congressional authorization but by the 1927 Act, 25 United States Code, Section 398(c), the states specifically were granted the authority to tax the entire production of oil and gas on Executive Order reservations, including even the Indians' royalty share.
Justice Rehnquist: Well, then we're not talking about taxes levied by states that are not on Indian reservations?
Mr. Cooney: We're talking about here the validity of the Jicarilla tax that is levied on production on the reservation when added to the state tax that is also imposed on the severance of oil and gas on the reservation.
Justice Rehnquist: But 398(c) doesn't purport to bear on the simple state-producer relationship independent of its relationship to the Indians, does it?
Mr. Cooney: Yes, Your Honor, we believe that 398(c) by its express terms gives the states the power to tax the producer on the reservation.
That's the purpose of the legislation.
And when that tax is added to the Jicarilla tax it creates, we believe, an impermissible multiple burden.
Justice Rehnquist: Well, what if you had no reservation?
Mr. Cooney: If we had no reservation there would be no case here today, because there would only be one tax.
There would be a state tax imposed on the severance of oil and gas--
Justice White: Yes, but if the state tax were in the words of the Jicarilla tax, it would be invalid under your submission.
Mr. Cooney: --Yes, it would.
Justice White: --Taxing only gas and oil that left the state?
Mr. Cooney: That's correct.
Under the most elementary Commerce Clause analysis, this Jicarilla tax ordinance as drafted violates the Commerce Clause.
Justice White: And your argument might be that because a state couldn't do it, neither can the Indian tribe.
Mr. Cooney: That brings us to the contention of the Jicarillas and the Solicitor here which we believe somewhat astounding, that the negative restraints of the Commerce Clause do not apply to the actions of tribes when they seek to tax or regulate commerce, when they seek to tax or regulate production of oil and gas on Indian reservations.
We think that notion is rooted in 19th century concepts of Indian tribes as separate nations wholly removed from the Union and not subject to the restraints which curbed the powers of the lesser sovereigns, the states and the municipalities within the federal system.
And we don't think that these assertions can be accepted by this Court.
That would allow 287 tribal governments, we submit, to hold commerce hostage by the fortuitous location of urgently needed energy resources under their reservations.
The Solicitor tells us that the answer to this problem is that Congress may act to curb tribal taxing powers if Congress feels they're being unjustly exercised or place a burden on commerce.
Chief Justice Burger: Well, if the Jicarilla Tribe taxed all the oil and gas extracted, without reference to where it was going, you wouldn't be here arguing the Commerce Clause case, would you?
Mr. Cooney: Yes, we would, Mr. Chief Justice.
Chief Justice Burger: On what grounds, then?
Mr. Cooney: Because if you remove the--
Chief Justice Burger: You're arguing the discrimination point?
Mr. Cooney: --The discrimination argument would not apply.
The direct burden on commerce under Michigan, Wisconsin would not apply, but there would still remain a multiple burden.
The state would tax, unapportioned, the entire volume, and does tax unapportioned the entire volume of production on the reservation, and the Jicarilla claim the right to tax unapportioned the entire volume of production on the reservation.
We believe that that kind of multiple burden is impermissible under the Commerce Clause and has been precluded by Congress in the 1927 Act.
There are two points that are critical to this issue.
The first is that the tribe and the state are not hierarchical sovereigns attempting to tax the same event.
One cannot control the taxing policy of the other as the United States can that of the states or the states that of the municipalities.
A second critical point here is that a severance tax on oil and gas production impacts the amount of production.
A tribal severance tax makes the activity of production on the reservation more expensive than it is off the reservation.
It affects the ability of the producers to produce in paying quantities and it renders marginally economic wells subject to early abandonment, as found by the district court.
The tribal tax, therefore, implicates the state tax by affecting the amount of production on the reservation against which the congressionally permitted state tax is assessed.
The multiple burden, we submit, could be solved only in one of two fashions.
First, by determining which of those two jurisdictions, the tribe or the state, has the better claim to tax, or by this Court devising some as yet hitherto unknown method of applying the apportionment test to such taxation of concentric sovereigns both of whom claim that the entire event, the entire local event, as it were, of severance takes place entirely within their borders.
Justice Rehnquist: Well, ordinarily, the state doesn't need any authority from Congress to impose a severance tax, does it?
Mr. Cooney: Your Honor, ordinarily I don't think that question is present here.
I think that as a matter of fact the--
Justice Rehnquist: Well, could you answer it, whether it's present or not?
Mr. Cooney: --I don't think the state does need authority to impose a severance tax on an Indian reservation, just as it doesn't need specific authority to impose a tax on other activities of non-Indians on the reservations unless that tax interferes with rights of self-government or is divested by congressional action.
But we have here specific congressional grants to the states to tax this production without any apportionment whatsoever.
The legislative history of the 1927 Act we think shows quite clearly that Congress intended to give to the tribe the benefits of the royalty, the bonus, and the rental income from leasing for oil and gas these Executive Order reservations, but to give to the states the right to tax the entire production of the oil and gas.
This construction of the 1927 Act is reinforced by Congress's own agency, the American Indian Policy Review Commission, which in 1977 recommended that 25 USC Section 398(c) and its counterpart, Section 398, be repealed for the specific purpose of allowing tribal severance taxation of production on reservations.
We think history enforces this conclusion.
Justice Rehnquist: Was that repealer ever enacted?
Mr. Cooney: Pardon?
Justice Rehnquist: Was that repealer ever enacted?
Mr. Cooney: It was never enacted.
25 USC Section 398(c) is still on the books, still allows unapportioned taxation of severance by states on Executive Order reservations, and we think thereby precludes the tribal severance tax.
Justice White: When... I take it, however, that the first opportunity for an agency, the bureau or the Department of Interior, or the United States, if you want to call it that, to address the question you've just talked about, was the Jicarilla tax, wasn't it?
Mr. Cooney: To address the question of severance taxes which are a new phenomena?
Justice White: Yes.
Mr. Cooney: Yes, Your Honor.
Justice White: And that they approved this tax?
Mr. Cooney: The Secretary Delegate in the field approved the tax with the specific proviso that there would be consent to jurisdiction in the United States district court to determine the validity of the tax.
Justice White: Well, I know, but the official position of the Department of Interior apparently is that this... that 398(c) does not foreclose such a tax.
Mr. Cooney: Apparently so, Your Honor, but it is up to this Court and the federal judiciary--
Justice White: I agree with that.
I'm just asking whether the Executive Branch has taken a position on it.
Mr. Cooney: --They have taken that position which reversed a 50-year-long position that states could tax severance of minerals on Indian reservations and that Indians did not.
Justice White: How was that prior construction evidenced with respect to the lack of power of the Indian tribe?
Mr. Cooney: Your Honor, there is evidence--
Justice White: Was it ever made express?
Mr. Cooney: --No, sir.
There is no--
Justice White: Why do you say that it was for 50 years the policy was to the contrary?
Mr. Cooney: --The 50-year policy was to permit state taxation and recognized the taxation--
Justice White: But it wasn't a 50-year policy to forbid Indian taxation?
Mr. Cooney: --Your Honor, I think that is best explained by the fact that the Indian severance taxes were never heard of or thought of by the Indian tribes until the late '70s.
And similarly, in the Montana case, last week, where the Court said that the Crows' long accommodation to game and fish regulation by the State of Montana on that reservation foreclosed any contention that that sort of tribal regulation was essential to the functioning of tribal self-government.
We think it's highly dubious that the Jicarilla self-government suddenly requires in the midst of the energy crisis this new tribal severance tax.
Chief Justice Burger: Let me ask a question about the breadth of the power of the tribe.
Could the tribe here have said that we're going to extract all of these valuables ourselves and so we'll make a contract with Amoco to do the work, and could they then in your view write any ticket they wanted in an arm's-length negotiation?
And it might amount to the same number of dollars as they're getting by royalty plus tax plus other things here?
Mr. Cooney: Yes, Your Honor, but for... if they attempted to impose a tax, we think it's preempted by 398(c).
Chief Justice Burger: It would be just like, this would be getting the same amount of dollars but by a negotiated contract?
Mr. Cooney: Yes, Your Honor, as to new contracts, I believe they could instead of exacting a 12-1/2 percent royalty, demand a 20 percent royalty and thereby increase the take.
But all of these--
Unidentified Justice: I suppose they could demand a 90 percent royalty but they just wouldn't... no one would contract with them.
Mr. Cooney: --That's the point, Your Honor.
Chief Justice Burger: So there would be a marketplace.
Mr. Cooney: And we think the Congress intended the royalty to be received by the tribe to be determined by the marketplace, by the auction and bidding proposals, and approval of the royalty rate set forth in the statute, and that they intended the rates of taxation to be applied by the states to that production.
Chief Justice Burger: Would that contract require the approval of the Department of Interior?
Mr. Cooney: Yes, it would, Your Honor.
Chief Justice Burger: Very well.
Mr. Cooney: Thank you, Mr. Chief Justice.
Chief Justice Burger: Mr. Nordhaus.
ORAL ARGUMENT OF ROBERT J. NORDHAUS, ESQ., ON BEHALF OF THE RESPONDENTS
Mr. Nordhaus: Mr. Chief Justice, and may it please the Court:
We believe that this tribal tax is within the doctrine of this Court in the Colville case, Washington v. Confederated Tribes of the Colville Reservation.
We think that it falls within the statements made that tribal taxes are valid where a tribe has a significant interest in the subject matter and that the interest is the strongest where revenues are derived from values generated on the reservation by activities involving the tribes and the taxpayer is the recipient of the tribal services.
Chief Justice Burger: The Colville case did not involve minerals extracted from the--
Mr. Nordhaus: No, Your Honor, but it pertains to the general sovereign power of the tribes to tax, which is--
Chief Justice Burger: --Dealing with what kind of... what was the subject of the tax?
Mr. Nordhaus: --That was a tax on cigarette sales; yes, Your Honor.
Justice Rehnquist: You don't draw any distinction between treaty Indian reservations and Executive Order reservations?
Mr. Nordhaus: No, Your Honor, I think this Court has never drawn the distinction between the powers and rights of tribes on Executive Order reservations... on reservations which are created by Act of Congress, or by Executive Order reservations.
There has never been a distinction except in debates in the Congress before the enactment of the '27 Act; and I'll go into this.
But this tax pertains only to production on tribal lands.
It does not pertain to any production on non-Indian fee lands or... in fact, there are essentially no non-Indian fee lands on the Jicarilla Apache Reservation.
There can be no question that the tribe is deeply involved in this activity.
The reservation contains approximately three-quarter million acres.
Over 500,000 acres are leased for oil and gas, many of these leases essentially negotiated by the Bureau of Indian Affairs at a time when the tribe did not really understand oil and gas matters.
These leases last for as long as 30, 40, 50 years.
The leases in this case were issued in 1953 when conditions were quite different from the conditions prevailing at this time.
The impact of the activity related to oil and gas impacts the tribe on a daily basis.
There are 1,400 wells; there are more than 400 of them drilled in the last five years.
The companies lay pipelines.
They denude the surface of the ground for roads.
Justice Rehnquist: Well, Mr. Nordhaus, 398(c) itself confines itself to Executive Order reservations, does it not?
Mr. Nordhaus: That's right.
But our contention is, Mr. Justice Rehnquist, that 398(c) does not apply to these leases.
They were issued under the 1933 act, which is 25 USC 396(a) to (e).
And that was an act to bring, that was a comprehensive leasing act whose express purpose was to bring Indian leasing into conformity with the Indian Reorganization Act.
That Act made no mention of state taxes; there was no authorization for state taxes.
Justice Rehnquist: Would you say 398(c) then was repealed by implication?
Mr. Nordhaus: We say that 398(c), the taxing provision of 398(c), was repealed by implication with respect to taxes to leases issued after the effective date of the 1938 act.
But we don't make an issue of the power of the states to tax non-Indian production on Indian lands.
I think that's not at issue in this case.
What we do say, that there was no divestiture or no preemption by this act of the Indian right to tax.
There was nothing mentioned in the 1927 act as to the Indian right to tax.
Justice Rehnquist: Well, is the argument that Congress compromised, in effect, and said the Indians would get the royalties and the state would get the taxes?
Mr. Nordhaus: That isn't a valid argument, Your Honor.
The compromise pertained to permits that had been issued on Indian reservations under the 1920 leasing act, at a time when there was no authority, according to the Attorney General, to lease Executive Order lands for minerals or oil and gas.
So Secretary Fall issued about some 475 permits under the 1920 act.
Justice Rehnquist: Any of them to himself?
Mr. Nordhaus: Pardon?
Justice Rehnquist: Any of them to himself?
Mr. Nordhaus: That doesn't appear in the record, but when Attorney General Stone took office he issued an opinion which invalidated these leases.
In the 1927 act the compromise which petitioners make a great deal of to-do about was a compromise which validated permits where the permittees had expended considerable sums.
There was again no question of state versus Indian taxes.
There was really no argument about state taxes because from 1919 until 1938 all of Indian leasing acts had permitted state taxation.
In respect to the tribal power to tax these activities, we maintain... and it is clear from the record that we tried to make in the district court and succeeded to some extent... although the district court held that the tribal services furnished to these petitioners were irrelevant, nevertheless, it is clear that the Jicarilla Apache Tribal Government, which is an Indian Reorganization Act government, and a very strong government, is the only effective area covering this three-quarters of a million acres.
The tribal government furnishes police, it furnishes fire protection, it has a road department, it expends for governmental services ten times what the State of New Mexico spends in that area.
In other words, it is clear from the record that we tried to make and were successful in some respects that the tribe was the only effective government.
It is clear that these companies demand and receive tribal services.
The companies' argument is that the tribe should provide these government services out of the royalties, which is the tribe's compensation for the resource which the energy companies are extracting, and they say, we should have the revenues from these royalties used for our benefit and government services should be provided from these royalties, not from taxes.
Justice White: What's the source of that definition of the severance tax?
That there's compensation to a sovereign for the extraction of a mineral?
That's on the assumption that--
Mr. Nordhaus: Well, that's their definition.
Justice White: --Who?
Mr. Nordhaus: --I think a royalty is... I don't say the severance tax is the compensation, I say that--
Justice White: I see.
Mr. Nordhaus: --the royalty is the compensation.
I'm saying that their argument is that the royalties should be used--
Justice White: What's the severance tax?
Mr. Nordhaus: --That the tribe does not have the power to tax them because they were there for 30 years under a contract which is frozen, which is inflexible, which can't be changed.
And they may be there for 50 years.
They say the tribe has no power to regulate their activities for the entire period of the lease.
They say that the tribe's compensation is fixed, which is correct.
But it is not correct to say that the tribe cannot tax them to provide essential government services which these people, which benefit these people.
The companies acknowledged at oral argument in the court of appeals, and the court of appeals mentioned that, that a state receives royalties from its state lands, there is no argument that they will make that a state cannot add a tax to production on state lands.
Chief Justice Burger: Well, you're saying that Amoco, the lessee should have known under Colville that in addition to paying a royalty and all other charges they were going to be subject to an Indian tax as well?
Mr. Nordhaus: Well, I think from the old cases of this Court and of the courts since 1902, they could anticipate that Indian governments that were required to furnish government services would have to tax, otherwise Indian governments can't survive.
Chief Justice Burger: Well, the Indian government in negotiating the contract could certainly have taken that into account in fixing the royalty, could it not?
Mr. Nordhaus: On that argument, Your Honor, that is premised on the point that taxes are consensual, that taxes may not be levied by a sovereign government unless the taxpayer consents to the imposition of the tax and the rate of the tax, and that would indicate that a sovereign government... and I'm saying that the tribes have this sovereignty... that a sovereign government needs the consent of each taxpayer to levy a tax.
And that is not what this Court and other courts have held with respect to Indian taxes.
In Buster v. Wright, a tax was imposed on business lots where the owners already had a fee interest.
In Morris v. Hitchcock there were cattle on the reservation prior to the imposition of the tax.
This Court upheld the tax.
Unidentified Justice: But this Court has in recent years retreated from the notion that Indians are independent sovereigns, has it not?
Mr. Nordhaus: Your Honor, that again is, doesn't really reach the question of the sovereign power to tax.
I am saying that until that power is divested, and unless that power to tax is inconsistent with the status of the tribe... which we say it is not, because it has been recognized over a long period of years... then the tribe has this power.
And then from here we get on to the point that the question whether Congress has divested the tribe of the power to tax.
Mr. Claiborne will go into the question of the 1927 act, but I do want to mention.
Section 110 of the Natural Gas Policy Act of 1978.
Congress in that act specifically recognized tribal severance taxes by permitting them to be added to the ceiling price.
And secondly, it recognized the possibility, and apparently accepted the possibility of the coexistence of state and tribal taxes.
Unidentified Justice: You mean, just because all the states had them, so they must have known about it?
Mr. Nordhaus: Yes, Your Honor, and also I cannot believe that it could be said that Congress divested the tribes of the power to tax and levy these severance taxes, or that these are inconsistent with any federal policy or energy policy if Congress permitted these taxes to be passed on to the consumer by legislation enacted in 1978.
Justice Stevens: Mr. Nordhaus, before you sit down, just as a matter of history, is your opponent correct in saying that this particular tax was never imposed by the Indians until a few years ago?
Mr. Nordhaus: This particular tax?
Justice Stevens: Kind of tax; the severance.
Mr. Nordhaus: This particular tax has not been imposed.
Justice Stevens: How do you explain that, as a matter of history?
Why did it take the Indians so long to realize that they had this power?
Mr. Nordhaus: I think that you have to go back to the history of the development of Indian tribes in the last few years.
Congress has expressed policy to effect self-determination and the tribes' desire to--
Justice Stevens: Do you rely on the change of policy since 1927 then?
Mr. Nordhaus: --In the Federal Government, absolutely.
The Indian Reorganization Act, the Self-Determination Act, the Indian Financing Act, all of which... the expressed policy of all of these acts was to strengthen tribal governments, to make them self-sufficient.
Justice Stevens: But if I understand your argument, none of those were really necessary to justify this tax.
Mr. Nordhaus: None of these?
Justice Stevens: None of these subsequent congressional holdings... they've all existed since 1930--
Mr. Nordhaus: No, Your Honor.
All they do is reaffirm the existence of the power and reaffirm the fact that Congress did not intend to divest the tribes of this power.
Chief Justice Burger: --Did the energy crisis have something to do with this too?
Mr. Nordhaus: Possibly, possibly, but--
Chief Justice Burger: An economic impact.
Mr. Nordhaus: --Right.
Chief Justice Burger: Very well, Mr. Claiborne.
ORAL ARGUMENT OF LOUIS F. CLAIBORNE, ESQ., ON BEHALF OF THE RESPONDENTS
Mr. Claiborne: Mr. Chief Justice, and may it please the Court:
If I may begin at the end, and by the end I mean last week's decision in the Montana Crow Tribe case, the teaching of that case, as we understand it, is that the territorial sovereignty of Indian tribes is somewhat more limited than that of states, that Indian tribes cannot regulate the activities of non-Indians on non-Indian land when there is no involvement of Indians and when there is no substantial effect on vital tribal interests.
But the Court was at pains to point out that on the other hand, so much is left of the inherent sovereignty of Indian tribes that they may regulate through taxation and other means those activities of non-Indians even on non-Indian land, the Court expressly pointed out, when there is a relationship with the Indians through contract or commercial dealings or in other ways; or when, independently of such consensual dealings between Indians and non-Indians, the activity of the non-Indians on the non-Indian land substantially affects vital tribal interests.
This case, it seems to us squarely falls under both of these principles, indicating what still survives of Indian sovereignty.
Here we're dealing with a continuing relationship between non-Indians and the tribe itself, leases for a long term, and operations which continue over a long term.
The operations take place on tribal lands.
The activities there affect that land, in a permanent way, as well, obviously, as surrounding land through environmental effects.
The operations are conducted under leases which require, and which in practice do involve a local work force, so there is a direct involvement of tribal members with the operations of the lessees.
The operations involve the use of tribal roads and the activities of the lessees implicate tribal services not only for the maintenance of such roads but also police and fire protection and all the other benefits of an established government within the reservation within which these activities take place.
Justice Rehnquist: Have you ever been in Rio Arriba County?
Mr. Claiborne: I have not, Your Honor.
Justice Rehnquist: I daresay there are probably more Jicarilla Indians that non-Jicarilla Indians in the County.
Mr. Claiborne: I am unaware of the figures with respect to the number of members who live within this reservation, Mr. Justice.
Justice White: But only Indian land's involved, isn't it?
Mr. Claiborne: Only... all of the land, as I appreciate it, within the Jicarilla Reservation, is tribal--
Justice White: So your reference to the Montana case about non-Indian land just isn't implicated in this case?
Mr. Claiborne: --No, but it does indicate a very important fact which is that the power to impose the taxes which were mentioned in that case are sovereign powers and not landowners' powers or a power to forbid entry or to condition entry.
Because obviously... I'm sorry, Mr. Justice White?
Justice White: That wasn't the holding of the case?
Mr. Claiborne: No, but I take it it was a considered dictum in the case.
It very plainly holds that even on non-Indian land, on fee-owned land, there in proper circumstances is the tribal power of taxation.
That can only be a sovereign power since by definition the tribe is not the landlord and by definition the tribe cannot prevent access to a man's privately owned land even though within the reservation.
Any power of taxation with respect to activities there must be a sovereign power.
Being a sovereign power it is not without express words contracted away when the tribe, who happened to be also the landlord in this case, makes an arrangement with the lessees.
Sovereigns do not commonly agree that they will waive any right in future to impose regulations or taxes, which rights they hold as sovereigns, even though they have contracted for a specific royalty or other price with the person with whom they deal.
And that principle surely is applicable here to the Jicarillas.
Justice Rehnquist: Do you think that 393(c) was impliedly repealed by later Indian legislation by Congress?
Mr. Claiborne: Mr. Justice Rehnquist, we have taken no position with respect to the argument that the 1938 Act impliedly repealed the state power to tax under the '27 Act.
The court of appeal expressly avoided any decision on that issue and it is not presented to this Court.
It is fair to say that the Government has argued for implied repeal in other cases in other courts but we have no occasion to take a firm position on that matter here.
We certainly do not rely in our argument today on any implied repeal of the '27 Act.
On the contrary, we concede for the purposes of the case that the State of New Mexico does have power pursuant to this '27 Act to impose its own severance tax, but it hardly follows that the '27 Act sub silentio withdrew any power which the tribe had as a matter of its own sovereignty to impose a like tax on activities which are plainly sufficiently connected with its interest to be justified.
I might say in passing that the '27 Act does not indicate a congressional intent to treat Executive Orders reservations differently; quite the contrary.
The 1927 Act is the Act which forbids the President henceforth to diminish or abolish Executive Order reservations, thereby putting them on the same permanent and secure footing of treaty and congressionally recognized reservations, and it is also the Act which places vis-a-vis royalty in oil and gas the Executive Order reservation Indians on exactly the same footing as an act passed in 1924 had done for those who held their lands by treaty.
The purpose of the 1927 Act was to fill a gap, the '24 Act having dealt only with treaty reservations, or so it had been construed.
Congress now said it is only right and proper that the same rule should apply on Executive Order reservations and we make that clear by imposing the identical scheme.
No one could reasonably argue that Indians on treaty reservations had no power to impose this sort of tax, and yet the '27 Act is in every relevant respect identical to the '24 Act.
There is, of course, no anomaly in having a right to exact royalty from your own land, and if you're a sovereign also to impose a severance tax.
New Mexico, Louisiana, and every other state does that without question.
Nor is there any anomaly in having two taxes bear on the same activity when one has concentric territorial sovereigns.
That is familiar enough in the federal-state context but in the Indian context it's resolved by the Colville case itself in which two taxes, though in that situation they were found to impair the viability of the cigarette business, were nevertheless held to be both sustainable.
One final word on the 1927 legislation.
It is said that there was a carefully crafted compromise in which the Indians somehow without it being mentioned lost their power of taxation.
There is not a word in that history to suggest that that was the intent or result of the legislation.
Mr. Justice Stevens wondered why the tribes had not before very recent times imposed such taxes, although their reservations had been mined for some years before.
I would answer that the tribes were not alerted to their prerogatives in the '20s and '30s... and, indeed, in the '40s and '50s... and only recently have come to recognize what was rightly theirs.
The same remark could be made of the cigarette taxes which were sustained in the Colville case.
That is also a relatively new idea but it's not a brand new idea, it's a revival of an idea that was prevalent at the turn of the century.
One has to recognize that the Cherokee imposed a tax on the exportation of hay whether or not from private or tribal lands.
It was sustained by the Attorney General of the United States, and it was cited with approval in this Court's opinion in Morris v. Hitchcock.
Morris v. Hitchcock of course itself involved a tribal tax on cattle grazing on an Indian reservation.
Buster v. Wright, cited with approval in the two most recent decisions of this Court, involved a tax on the privilege of doing business by lot owners in towns who owned their own land and whose town government had expressly been given the power to tax as well, to tax that very privilege.
Buster v. Wright, therefore, is a case in which there was a town tax and an Indian tax, and no power to remove, and yet the court of appeal sustained the tax and this Court has in both Colville and Montana cited that decision.
Justice Blackmun: Mr. Claiborne, do you think there's any limit to the rate of tax that the tribe can impose?
Mr. Claiborne: I don't know, Mr. Justice Blackmun, how one calculates that limit.
I think there are assurances that that the tax will not be oppressive.
There is, first of all, economic self-incentive not to drive away potential lessees or to have them cancel their leases as they are free to do in this case.
Unidentified Justice: Aren't all tax ordinances like others subject to the approval of the?
Mr. Claiborne: Well, then, subject to the approval of the Secretary, and that approval is a serious insurance that the tax rate will not be out of all bounds with the benefits conferred with the interests of the tribe and with what the traffic will bear.
And finally, of course, there is a congressional oversight over tribal taxation, as we say there is with respect to state severance taxes.
We have argued, or filed a brief in the next case in which we suggest that there is no occasion for a court to determine what a maximum rate of a severance tax is, but that Congress is free, and should the privilege be abused, no doubt will intervene to set a limit.
Justice White: Mr. Claiborne, do you know, on whom is this tax placed?
Who pays it?
Mr. Claiborne: Mr. Justice White, I'm told that it's paid on whoever is the owner of the minerals at the moment of severance.
Justice White: And so it's... and do you know if the gas is sold at the wellhead to the pipeline or not?
Mr. Claiborne: It is in most instances.
Now, let me explain the reason for the wording of the ordinance as construed by the court of appeal, and without any contrary guidance--
Justice White: So they construe it as a severance tax, don't they?
Mr. Claiborne: --They construe it as a severance tax, and they construe the words
"sold or transported off the reservation. "
to mean sold on the reservation, or transported without sale, when the pipeline is also the extractor, or sold by the Indians themselves with respect to any portion they might take in kind.
The only exemption is not for the Indian royalty in kind, no matter what happens to it, but only if it is used by them on the reservation.
If it's sold by them on the reservation... they pay the tax.
Justice White: Do you think the court of appeals construed the ordinance that way?
Mr. Claiborne: It's clear that they--
Justice White: At least they didn't think it was paid... it certainly wasn't paid by a pipeline, and they didn't think it was paid for transportation or for sale?
Mr. Claiborne: --I refer Your Honor to page 155 of the Joint Appendix, which makes clear how the court of appeals construed this act.
Justice White: And that, I take it, is your answer to at least one of the arguments of your opposition?
Mr. Claiborne: Yes.
And I would say that the tribe is in the best position to construe its own ordinance and they have so construed it in all courts.
Chief Justice Burger: Do you have anything further, counsel?
There is one minute remaining.
ORAL ARGUMENT OF JOHN R. COONEY, ESQ., ON BEHALF OF THE PETITIONERS AMOCO AND MARATHON -- REBUTTAL
Mr. Cooney: Thank you.
Mr. Chief Justice, and may it please the Court:
Your Honors, we think the significance of Section 110 of the Natural Gas Policy Act is merely in recognizing the impact of severance taxes on production, and that if those severance taxes are not allowed to be passed through production is impacted.
That's precisely our point of the impact of the tribal tax on the state severance tax.
Congress specifically left the question of validity of this tribal severance tax to this Court.
There is no record to support Mr. Nordhaus's claims concerning the cost of tribal services to the lessees.
As a matter of fact, the record that is before the Court shows that the royalty revenue to the tribe more than supports the entire tribal government.
Thirdly, while there was no mention of tribal severance taxation in the debates preceding the '27 Act, likewise there was no mention of tribal authority over purchasers of alienated lands in the allotment acts considered by this Court in the Montana case last week.
But we think just as that authority could not have survived the allotment acts, likewise tribal severance taxation could not have survived the 1927 statute.
Chief Justice Burger: Thank you, gentlemen.
The case is submitted.
IN THE SUPREME COURT OF THE UNITED STATES
J. GREGORY MERRION AND ROBERT L. BAYLESS, ETC., ET AL., Petitioners, v. JICARILLA APACHE TRIBE ET AL.; and AMOCO PRODUCTION COMPANY AND MARATHON OIL COMPANY, Petitioners, v. JICARILLA APACHE TRIBE ET AL.
No. 80-11, No. 80-15
November 4, 1981
The above-entitled matter came on for oral argument before the Supreme Court of the United States at 1:47 o'clock p.m.
JASON W. KELLAHIN, ESQ., Santa Fe, New Mexico; on behalf of the Petitioners.
JOHN R. COONEY, ESQ., Albuquerque, New Mexico; on behalf of the Petitioners.
ROBERT J. NORDHAUS, ESQ., Albuquerque, New Mexico; on behalf of the Respondents.
LOUIS F. CLAIBORNE, ESQ., Office of the Solicitor General, Department of Justice, Washington, D. C.; on behalf of the Respondents.
CHIEF JUSTICE BURGER: We will hear arguments next in Merrion against Jicarilla Apache Tribe.
I think you may proceed now, whenever you are ready.
ORAL ARGUMENT OF JASON W. KELLAHIN, ESQ., ON BEHALF OF THE PETITIONERS
MR. KELLAHIN: Mr. Chief Justice, and may it please the Court, this case is here on certiorari to the Tenth Circuit, and involves the power of an Indian tribe to tax non-Indians who are lawfully on the reservation. The case was argued on March the 30th of this year and by order of the Court was set for reargument here today.
The facts of the case are quite simple, but the issues, the legal issues involved direct us to some fundamental constitutional questions.
The case involves the Jicarilla Apache Tribe, which is an Indian tribe occupying an Executive Order Indian reservation located in the northwestern part of the state of New Mexico. The reservation is located in an area ceded to the United States by Mexico under the Treaty of Guadalupe-Hidalgo.
QUESTION: So there is no question of inherent tribal sovereignty, I take it.
MR. KELLAHIN: That is our position, because neither Spain nor Mexico ever recognized any sovereignty existed.
QUESTION: In fact, Article VIII of the Treaty of Guadalupe-Hidalgo makes special provisions for Mexican title, but none for Indian title.
MR. KELLAHIN: That is correct. The only mention of Indians at all is in Article XI, which deals with the obligation of the United States to prevent incursions into the country of Mexico. So we have no sovereignty existing as of that date, and that was recognized by this Court in the case of Lake Corporation of Jesus Christ of Latter Day Saints, where they said that the only sovereign at that date was the United States itself, and all other sovereignty must of necessity be derived from that source, and that goes directly to this question of inherent sovereignty, which is an issue involved here today.
The Jicarilla Tribe is organized under the Indian Reorganization Act. It adopted a constitution, and that constitution purports to give it the right to tax non-Indians. The Petitioners have been on the reservation for -- some of them for many years, under oil and gas leases, some of which were issued at least 30 years ago. They were issued pursuant to federal law, under regulations promulgated by the Secretary of the Interior. They were assigned on behalf of the tribe and were approved by the Secretary of Interior as required by law.
Now, we are not here challenging any provisions of those leases. We are not quarreling about any rental or royalty that has been assessed pursuant to the agreement under which the Petitioners entered the reservation. What we are challenging is a severance tax ordinance which was adopted by the tribe in 1976, which imposed a tax on oil and gas sold or transported off the reservation.
The Petitioners brought suit in the District Court of New Mexico, which held that the ordinance was invalid and void. The Court of Appeals, in reversing that decision, held that the power to tax was an attribute of inherent sovereignty, since no treaty or Act of Congress authorized it, and the power to tax was not pre-empted by the federal government, and it did not violate the commerce clause.
Now, that gives us the three issues we want to discuss here today. I would like to address the first issue, the question of the inherent Indian sovereignty. My colleague will discuss the pre-emption by federal law and the issue of the commerce clause.
The Secretary in his supplemental brief recognized the issue we are talking about very clearly when he said, "The dispositive point is whether the Jicarilla Tribe is entitled to exercise and is here exercising the sovereign prerogative of taxation as the United States or a state or a municipality might do." With that, we agree. That is exactly what we are here to talk about.
Now, if it is true that the tribe is exercising that kind of an authority, the authority to tax, as does the federal government or a state, and that in the absence of any constitutional provision or treaty or Act of Congress, then the tribe is necessarily exercising governmental powers over non-members of the tribe, and under our constitutional system, the powers of all governments are derived from the people. That is fundamental to our country.
Within the boundaries of the United States, the Americans have consented to federal and state governmental power over their liberty and their property. As safeguards against the abuse of this power, our government is controlled through the democratic processes, and the exercise of such powers is subject to constitutional limitations.
In this nation, the sovereign governs only with the consent of the governed. This fundamental aspect of political control is wholly lacking here, where the Jicarilla Tribe seeks to assert governmental power over non-members of the tribe who are forever barred from any participation in tribal affairs.
It is our position that the tribe does not have any such sovereign power except, and their right to tax is limited to, the right to condition the entry of non-Indians or non-members of the tribe onto their reservations. That is the tenor of all the cases dealing with this issue, including the most recent.
These Petitioners are on Jicarilla reservation under valid oil and gas leases issued long before there was any attempt to tax. The leases stated the conditions under which they could enter, and the conditions that would permit them to remain, and taxation was not one of those conditions. Yet, an examination of the cases cited by the Respondents in this case show that --
QUESTION: Is there a clause that I recall in that lease that they cannot alter the royalty structure?
MR. KELLAHIN: That is correct. Neither the rental nor the royalty may be increased during the life of the lease, Your Honor, and we submit that this is a veiled attempt to do exactly that in the name of taxation. They call it a tax, but it is adding an additional burden on the production from the lease.
The other cases that have been relied on all involve the right of the tribes to impose conditions on those who enter on the reservations. This is true of the early cases, like the grazing feed cases, from Morris versus Hitchcock on down to Colville, where this Court upheld the tribe's right to collect a cigarette tax.
In the recent case of Montana versus the United States, it was pointed out very clearly that the sovereignty exercised by Indian tribes extends only to the right to make their own laws and be governed by them. Nowhere in our jurisprudence do we find anything that says that tribes have a right to make laws and govern others by them, as they are attempting to do here.
QUESTION: Mr. Kellahin, the Colville case appeared to articulate a position that it is a fundamental attribute of sovereignty, the power to tax transactions on the trust lands.
MR. KELLAHIN: That is very true, Your Honor.
QUESTION: There wasn't an articulation there, as I read it, of basing it on the power to exclude non-members from the reservation. How do you distinguish the Colville case?
MR. KELLAHIN: The Court had used that language, but it was wholly unnecessary to the decision, because in another portion of the decision it pointed out that those who would avoid the tax --
QUESTION: Well, the Colville case also came as a result of the Treaty of Point Elliott with Indians who were ceding lands over which they had tribal sovereignty as opposed to the Jicarilla Apaches, who came in by virtue of the Treaty of Guadalupe-Hidalgo, did it not?
MR. KELLAHIN: That is correct, Your Honor. There was no treaty involved with the Jicarilla Apache tribe. There never was a treaty reached with the Jicarillas.
QUESTION: Didn't the Jicarillas win a case before the Indian Claims Commission that they had been deprived of their tribal lands, their aboriginal lands? Their aboriginal title?
MR. KELLAHIN: Yes, Justice White --
QUESTION: Didn't they --
MR. KELLAHIN: They were awarded some $9.5 million, I believe, for the loss of their aboriginal tribal lands, which were very loosely defined as the area east of the Rio Grande over which they had historically roamed.
QUESTION: Was that ever reviewed by this Court?
MR. KELLAHIN: I believe not. I believe not, Your Honor.
Getting back, Justice O'Connor, to your question, I would distinguish Colville on the grounds that no one has to go buy -- they were marketing a tax exemption, as this Court clearly pointed out, and it was not a true tax in the sense that a state or federal government tax is imposed for the reason there is no sanction. It was an optional thing in the first place, and it was accepted or you could reject it, and if you accepted it, you had no choice but to pay the tax, and that was the ruling in Buster versus Wright, one of the early tax cases, where the Court very clearly pointed out that this was an optional thing. Those who wanted to go on the reservation and trade under Buster versus Wright were required to pay the tax.
QUESTION: Well, I suppose no one is forced to go on the reservation and buy or lease oil or mineral rights.
MR. KELLAHIN: That is correct, but the point is, we are already -- our Petitioners are already there, and they were there before there was any tax. The conditions of their entry, it is our position, were imposed by the leases, and now this is a modification of those leases, and I would draw that distinction from Colville.
In Montana, this Court held that the exercise of tribal power beyond what is necessary to protect tribal self-government or to control internal relations is inconsistent with their dependent status, and so cannot survive without Congressional delegation. There has been no Congressional delegation of this authority here, as there was in some of the other cases such as Morris versus Hitchcock and some of the others.
The Montana court did -- Montana case did admittedly hold that the tribe does exercise some forms of civil jurisdiction over non-members of the tribe, and may do this through taxation, licensing, or other means and activities of non-members who enter into consensual relations with the tribe.
Now, I think that is the key word in that portion of the decision. They enter into a consensual arrangement with the tribe through commercial dealings, contracts, leases, or other arrangements. Now, that is what we have done. We have entered into a consensual relationship with the tribe, of which taxation was no part. The Petitioners view this as upholding what we were just talking about in the -- case. They have a right to impose a tax if it is a condition of entering onto the reservation, but they did not do so at the time, and they cannot in our view do it after we are already on and have spent some millions of dollars in developing these leases. We can't pick up the leases and go elsewhere, as was suggested in Colville. We either pay the tax or we lose the lease.
The Colville case is consistent, in our view, with the argument which we are now making, and this result does not require a finding of governmental sovereignty on a par with that of the federal government or the state such as is sought to be asserted here. Under the ruling, Colville is argued perhaps that the tribe had a significant interest, which was one of the key arguments in the Colville decision, that the tribe had a significant interest in the subject matter which enabled it to tax, and of course we do not deny that the tribe has a significant interest in its tribal lands.
However, the reservation lands are held in trust for it by the United States government. The manner in which the oil and gas leases are going to be handled, both issuance of the leases in the first instance, their development, and the manner of payment of royalties and rentals is all controlled by federal regulation, and the tribe's interest in the lands insofar as the oil and gas mineral interest is concerned was assigned for the terms of the leases, and we submit that they have no significant interest remaining at this time, as was contemplated in Colville, which would support this tax.
QUESTION: Is it your position that this tribe does not possess sovereignty in the traditional sense that we have referred to that and other cases?
MR. KELLAHIN: Mr. Chief Justice Burger, I do not feel they have the sovereignty as the Court has referred to in other cases, but I think an analysis of the other cases would indicate that the sovereignty the Court has talked about down through the years was something considerably less than true sovereignty, and the more recent cases have limited the scope of that sovereignty step by step. For example, we come to the Oliphant, where they were attempting to assert criminal jurisdiction over a non-Indian on to reservation, and this Court held that that jurisdiction could not he exercised.
In Montana, the Court interpreted that ruling as applying also to the civil area, and for that reason, I do not feel that we are really talking about true sovereignty in the sense of the old cases. We submit that the Court of Appeals should be reversed. Thank you.
CHIEF JUSTICE BURGER: Mr. Cooney?
ORAL ARGUMENT OF JOHN R. COONEY, ESQ., ON BEHALF OF THE PETITIONERS
MR. COONEY: Chief Justice, and may it please the Court, we support the argument that the Constitution does not permit Indian tribes to tax production by non-Indian lessees. My argument will be that assuming for the sake of argument that such power exists, the Indian tax here violates the commerce clause, and is pre-empted by 25 United States Code Section 398(C).
If such a power of taxation is found to exist, fundamental constitutional concerns require that that tax must be subject to the restraints of the Constitution, but the tribe and the Secretary argue here not only that the tribe may tax other than as a condition of entry, but that those powers are not subject to the negative implications of the commerce clause which prohibits states and lesser sovereigns from impeding the free flow of commerce.
We submit that if this argument is accepted, Indian tribes will be invited to impose discriminatory taxes which unduly burden commerce as the Jicarilla have done here, and --
QUESTION: Well, there is certainly nothing in the original grant to Congress of the power to regulate commerce among the several states to suggest that there is a negative implication to it, is there? That in the absence of Congressional action, a state act might be found violative of that clause.
MR. COONEY: Justice Rehnquist, that is what we submit is wrong with the Secretary's argument here. That same argument, the affirmative power of Congress to prevent states from burdening commerce was urged early on in this Court's consideration of the commerce clause to prevent the Court from finding negative implications in the clause limiting the powers of states. This is the first opportunity the Court has had to consider the application of the commerce clause with the powers of Indian tribes over commerce, perhaps because it is the first instance in which Indian tribes have attempted to exert such powers over commerce.
QUESTION: Well, maybe the Court went wrong a long time ago.
MR. COONEY: Your Honor, the jurisprudence finding the negative implications is so well established in this Court and has been for decades that we believe the Court was not wrong and that those same negative implications must restrain the powers of Indian tribes.
QUESTION: Well, may I ask, Mr. Nordhaus as I understand it, this severance tax, of course, was approved by the Secretary of the Interior, was it not?
MR. COONEY: Yes, Your Honor.
QUESTION: Pursuant to a Congressional statute?
MR. COONEY: Your Honor, we find no statute which requires the Secretary to approve the tax.
QUESTION: Where did the Secretary get the authority?
MR. COONEY: The tribal constitution states that the Secretary should approve the tribal ordinances, but we submit that the more fact of federal approval of the Indian taxing --
QUESTION: I am not speaking so much just of federal approval. You suggest that the Secretary's authority to approve it derives from the Indian constitution, not from the Congress?
MR. COONEY: There is nothing in the IRA, nothing in the Indian Reorganization Act which requires the Secretary to approve tribal taxing ordinances.
QUESTION: Well, I am not thinking it requires. Does it authorize it?
MR. COONEY: Your Honor, to the extent that it authorizes the Secretary to approve tribal constitutions and the tribal constitution provides for Secretarial approval of taxing ordinances --
QUESTION: Of course, you see what I am getting at.
MR. COONEY: Yes.
QUESTION: If in fact, accepting your argument, does it apply here at all if there has been Congressional authorization and federal approval of this severance tax?
MR. COONEY: Well, there has been no federal approval by Congress of an Indian severance tax whatsoever.
QUESTION: Well, I gather that depends on how we are going to read the authorization that went to the Secretary, doesn't it?
MR. COONEY: That's correct, Your Honor, and we think that Congress could not have intended under the 1927 Act, which I will discuss in a moment, that the states would have to share the right of taxation with the tribe, and that the tribal tax impacts the state tax by affecting the amount of production against which the state tax is measured.
QUESTION: Is this provision in the Indian constitution unique, or is that a common pattern?
MR. COONEY: Apparently not, Your Honor, because a similar provision or --
QUESTION: Apparently not which?
MR. COONEY: -- or a similar approval was in the Colville case. The Secretary approved the Indian cigarette tax there as well, and this Court found that the mere fact of federal approval in that case could not act to oust the state tax power, and we say here that the mere perfunctory secretarial approval in the field likewise could not act to oust or diminish the state's power of taxation granted by the 1927 Act. Now, we --
QUESTION: In other words, the only Congressional action that would answer your argument on the negative implications of the Indian commerce clause would have to be an affirmative Congressional authority to the tribes to impose the tax.
MR. COONEY: Affirmative Congressional authority, and we think in this case coupled with an affirmative Congressional withdrawal of the grant to the states in 1927 of the power to tax the same production. Now, the commerce clause has to limit the power of the tribes, we believe, and the commerce clause, or this tax violates the commerce clause in several respects.
QUESTION: Counsel, before going on with that, and before you leave the approval of the Secretary, do we not in this instance also have an Indian -- a tribal constitution adopted under the Indian Reorganization Act, which constitution contains a provision saying that they have the power to tax non-members, and which constitution was approved by the Secretary?
MR. COONEY: Yes, Your Honor, we do.
QUESTION: And isn't that pursuant to a Congressional enactment, the Indian Reorganization Act, that gave him the power to do that?
MR. COONEY: No, Your Honor, we don't think that the Indian Reorganization Act authorized the Secretary to create any governmental powers in Indian tribes. As a matter of fact, the legislative history shows that the first draft of that Act would have granted federal and municipal powers to tribes, and that was not acceptable to Congress. The Oliphant case recognizes, I believe, that the IRA did not create any powers in Indian tribes which did not theretofore exist, and we are led back to the same question of whether the power exists in the first place.
Now, the plain language of this ordinance, we believe, discriminates against interstate commerce. It taxes only gas or oil sold or transported off the reservation, and we think the tribe has attempted to create a favored position for on reservation industry. The classic discrimination represented by that type of a scheme has been struck down by this Court many times.
Secondly, as the tax is imposed only when the production is transported off the reservation, it is a direct, unapportioned tax on commerce itself which directly violates Michigan-Wisconsin Pipe Line.
QUESTION: How much goes to --
MR. COONEY: Eighty percent.
QUESTION: Eighty percent goes outside?
MR. COONEY: Eighty percent goes into interstate commerce.
QUESTION: Twenty percent goes to the tribe?
MR. COONEY: Pardon?
QUESTION: Twenty percent goes to the tribe on the reservation?
MR. COONEY: A very small percentage, not revealed by the record, goes to the tribe. The rest is consumed intrastate in New Mexico. Eighty percent of this --
QUESTION: On the reservation?
MR. COONEY: Not on the reservation. Eighty percent is -- that is not shown by the record, how much of the 20 percent stays on the reservation or goes into the state of New Mexico, but 100 percent goes off the reservation. Eighty percent goes into interstate commerce. Now, this ordinance could be amended to eliminate those discriminatory features, but even if it were, it would still create an impermissible multiple burden upon commerce.
Both the tribe and the state can claim that their respective taxes are imposed on taxpayers which have anappropriate nexus with the jurisdiction, that each tax is properly apportioned, and that each tax does not discriminate, assuming the tribal ordinance were amended, and both can claim that each government provides the taxpayers with the benefits and advantages of a civilized society. Therefore, both the tribe and the state can claim the right to impose and they have imposed general taxes for the support of government against the full value of the production, without any apportionment.
Now, the traditional tests of Complete Auto and Washington Stevedoring provide no solution to the multiple burden problem present here. The tribe and the state are concentric sovereigns, and neither has any power over the taxing policy of the other. The tribal tax impacts the state tax by affecting the ability to produce in paying quantities and rendering marginal wells economic, thereby reducing the amount of production against which the state tax is measured.
We think this problem is analogous to that presented in Japan Line. There, the Court subjected the California shipping container tax to an extended analysis beyond the traditional four-part test, and struck down the tax because no tribunal with jurisdiction over both California and Japan could prevent the multiple burden.
While it is true that this Court has jurisdiction over the tribe and the state, Commonwealth Edison teaches that it is inappropriate for the judiciary to attempt to measure the rate of a general tax for the support of government against the value of benefits provided to the taxpayer. Judicial resolution of the multiple burden here would require not only measurement of the benefits provided by the state and the tribe against the tax levied by age, but also some formula for apportioning those general taxes between the two sovereigns.
Furthermore, if the Secretary is right in his commerce clause claim that the commerce clause doesn't even bind the tribe, then it would seem the Court would have no jurisdiction to invalidate the tribal tax and the result in Japan Line would seem to require invalidation of the state tax, which would directly contradict the grant in 1927 by Congress to the states of the right to tax.
The Court, then, we submit, is not the tribunal which can or should allocate between the state and the tribe the right to tax, and while Congress has the power to act, Congress did act in 1927 to grant to the states the right to tax the production on these reservations. They made a clear choice, granting the rentals, royalties, and bonuses to the tribe, an income which was more than sufficient in 1976 to support the entire tribal government.
QUESTION: Counsel, you state they made a clear choice. Do you think they had this possibility of tribal taxation in mind at all?
MR. COONEY: Yes, Your Honor. In 1901 they authorized the imposition of taxes for the benefits of Indians in the Right of Way Acts in 27 USC, Sections 319 and 321. That history, coupled with the fact that this state tax was allowed to be applied against the share obtained for the Indians as well, leads us to conclude, along with the three years of debate and the fight between the states and the representatives of the Indians over who should get the royalties, that Congress could not have intended, in view of the economics of oil and gas production, that the state's tax would have to be shared with an Indian tax.
We think the most compelling argument for the preclusive effect of the 1927 Act is the recommendation of Congress's own agency, the American Indian Policy Review Commission, in 1977, that the 1927 Act and the 1924 Act, which similarly grants states rights of taxation on treaty reservations, should be amended or repealed to permit tribal taxation of such production.
The Natural Gas Policy Act pass-through provision in 1978 specifically left the validity of these tribal taxes up to this Court in this case. We think that any reconsideration of that policy permitting the states to tax this production, which necessarily precludes tribal taxation, should be left to Congress, as was the question of any limitation on the state's rights to tax production under the Mineral Leasing Act left to Congress last term in Commonwealth Edison.
If the 1927 Act is not an outright pre-emption, both the tribe and the state obviously can't tax at full value without a multiple burden on commerce, and the 1927 Act is at least a clear Congressional choice for the state tax, and if it is not, if the Court does not accept that argument, or that the tax, tribal tax is not pre-empted by extensive federal regulation, as we have argued in our brief, then we are left with the multiple burden on commerce, and we are left with no means of apportioning that multiple burden, and no means of choosing between which sovereign can tax.
We believe that these considerations would lead the Court back to the basic sovereignty issue, and perhaps to the conclusion that there is no room in our constitutional system of representative government for this form of taxation by 287 tribal governments, in which non-members can ever have or never have any voice.
CHIEF JUSTICE BURGER: Mr. Nordhaus?
ORAL ARGUMENT OF ROBERT J. NORDHAUS, ESQ., ON BEHALF OF THE RESPONDENTS
MR. NORDHAUS: Mr. Chief Justice, and if it please the Court, in answer to the argument that tribal sovereignty was not recognized in New Mexico and Arizona as a result of the Treaty of Guadalupe-Hidalgo, I only want to state that neither the federal government, federal officials, nor this Court has ever differentiated between the sovereignty of tribes in New Mexico and Arizona and elsewhere in the United States.
QUESTION: May there not be good reason for such differentiation, when you are interpreting the treaty of Point Elliott and saying that you -- in Washington, and saying that you resolve all ambiguities in favor of people who didn't understand English well, and when you are interpreting an Executive Order which was disposing of lands that were already completely under the dominion of the United States as the result of a treaty with another foreign sovereign?
MR. NORDHAUS: Your Honor, there was no reference to Indian tribes, and so there was no inference that Indian tribes were even mentioned, and the fact that officials of the United States negotiated treaties with Indian tribes in the early fifties, immediately after the treaty, indicates that those officials recognized the sovereignty of these tribes, and throughout the years there has been no question as to the sovereign status of tribes in that area.
The Jicarilla Apache Tribe, by the way, was also -- ancestors of these tribal people were located in Colorado and Kansas. They were not only in New Mexico and Arizona.
QUESTION: Well, sovereignty doesn't necessarily -- tribal sovereignty isn't necessarily connected with a piece of land.
MR. NORDHAUS: It is not. No, Your Honor.
QUESTION: And it is the tribe --
MR. NORDHAUS: It is the tribe.
QUESTION: -- that has sovereignty, and tribal sovereignty has been recognized, and a tribe, even though it has been moved from one part of the country to another.
MR. NORDHAUS: It is still recognized, and it has been recognized by the European nations and by the United States.
To go to the main portion of the argument, I think we have to go back to the statement of Felix Cohn that has often been repeated by this Court, and is most significant, is that one of the powers essential to the maintenance of any government is the power to levy taxes, and I think in order to understand the problem in the situation of the western tribes with large areas to govern, we should take a look at the Jicarilla Apache reservation.
It contains 750,000 acres in a mountainous area of northwest New Mexico, near the Colorado border. It is remote from Albuquerque, where the federal agencies are located, and it is remote from Santa Fe, the state capital. There are, outside of one federal highway and two state roads, the road network, which is extensive, serving the oil and gas lessees and others, is maintained by the tribe out of tribal funds, and to some extent by the BIA.
Law and order is maintained by a tribal police force of 20 officers, some of whom are deputized by the state of New Mexico, but all paid out of tribal funds, as compared to one tribal police officer who must patrol the entire reservation.
QUESTION: Mr. Nordhaus, may I interrupt you?
MR. NORDHAUS: Yes.
QUESTION: While we are discussing the sovereignty problem, first of all, I would like to ask you your views on a question Justice O'Connor asked one of your counsel for the other side about the 1934 Act, which spelled out some of the powers of the tribes. Your opponent says that that statute did not enlarge any sovereign powers that theretofore existed. Do you agree with that?
MR. NORDHAUS: I -- pardon me.
QUESTION: Do you agree with that --
MR. NORDHAUS: I don't --
QUESTION: -- did not enlarge it?
MR. NORDHAUS: It enlarged the sovereign powers, but it expressly recognized the inherent sovereign powers of tribes, and --
QUESTION: But insofar as we are talking about the power to tax --
MR. NORDHAUS: The power to tax.
QUESTION: -- you rely on that statute as the source of the power to tax?
MR. NORDHAUS: No, Your Honor. We rely on the inherent sovereign power to tax --
QUESTION: That pre-existed.
MR. NORDHAUS: -- that pre-existed, and was reaffirmed by the --
QUESTION: Did the sovereign power to tax exist before the reservation was created?
MR. NORDHAUS: The sovereign -- well, that is a difficult question.
QUESTION: Well, the reason I ask it, the Executive Order creating the reservation back in the 1880s somewhere has a clause in it that says it shall not affect existing rights, or something of that nature.
MR. NORDHAUS: That's correct.
QUESTION: And I am just wondering what your view would be in the case -- supposing these people or some silver miners or something had their rights in 1887, in the area now encompassed in the reservation. Would your tribe have the power to tax them?
MR. NORDHAUS: Your Honor, I -- that is a difficult question. I think the tribe would, as a government, as a government for the territory that is now recognized by the United States, and I think the United States in creating the Executive Order reservations recognized the inherent power of tribes to tax on a territorial basis, tax non-Indians and Indians alike, and I think this Court has recognized that the power over non-Indians has a territorial basis, but --
QUESTION: Over non-Indians has a territorial basis?
MR. NORDHAUS: Has a territorial basis.
QUESTION: But that is not true with respect to the power over Indians, is it?
MR. NORDHAUS: The power over Indians has more than a territorial basis.
QUESTION: So the powers over the members and the non-members are not coextensive?
MR. NORDHAUS: I think that is correct. I think this Court has so stated. The activities of oil and gas lessees on this reservation impact tribal members and the tribal lands extensively on a daily basis. The oil companies, these companies demand and receive the benefits of tribal roads, tribal police protection, and tribal community services.
QUESTION: Mr. Nordhaus --
MR. NORDHAUS: Yes.
QUESTION: -- before you go on, I would like to be clearer in my own mind about your position on this thing. Do you think basically that the cases from this Court which have dealt with the power to tax rest essentially on a power to tax which stems from a power of the Indian tribe to exclude non-members from the territory of the reservation?
MR. NORDHAUS: Your Honor, I disagree completely with that thesis. A power to tax that is based on a power to exclude is really not a sovereign power. It is a power of a landlord, and none of the earlier cases really based the power to tax on the power to exclude, and I go back to Morris against Hitchcock, in 1904, which placed the tax on cattle on the Chickasaw reservation, the taxes imposed in June or July of 1904, and attached cattle that were already on the reservation in January of that year, and that was one of the bases on which the tax was attacked.
Again, in Buster against Wright, the tax was applied to owners of business lots, a business activity tax was applied to those who were on the reservation owning property and who could not be excluded, and if you -- if the contention is that the power to tax is based on the power to exclude, you are saying that these oil and gas lessees who have been on the reservation for 25 or 30 years, and whose leases may extend through production by another 20 or 30 years, that the tribe has no power to change the conditions of their occupancy.
In other word, they have a diplomatic immunity forever from any change in the conditions on the reservation. If --
QUESTION: What, then, do you do with the case of United States against Cagama, which says that the only two sovereign entities recognized by the Constitution are the federal government and the state governments?
MR. NORDHAUS: Well, Your Honor, the tribal governments are dependent sovereign governments. They exist -- their sovereign powers can be divested by Congress. But until Congress acts, they retain those powers, as this Court said in U. S. v. Wheeler. They retain all the powers which they had which are not divested or which are inconsistent with their status, and our contention is that there is nothing in the tax power that is inconsistent with the status of tribes.
In other words, tribal governments cannot exist without taxation, and taxation that is appropriate for one tribe may be inappropriate for another. The tribes have to levy the taxes where they find the resource on which to tax. And we believe that this type of tax comes within the definition of the Colville tax in every respect.
QUESTION: Do you think there is anything necessarily inconsistent with the exclusion theory in the language of previous cases from this theory?
MR. NORDHAUS: I think the inconsistency lies in the facts of the previous cases.
QUESTION: But not in the language. You would concede that.
MR. NORDHAUS: Not necessarily in the language, but the facts of the earlier cases and of the later cases surely lead to the conclusion that the tax was not based on the power to exclude because the tax was imposed on people who already had property rights on the reservation.
QUESTION: And yet you would tie to the territory.
MR. NORDHAUS: I would tie it to some extent to the territory, to the reservation, because that is the area that must be governed, and a tribe must govern its territorial area. Without taxation, no government can survive. But before I finish, Mr. Claiborne is going to discuss the effect of the 1927 Act, which the Petitioners say grant to the states an exclusive right to tax, but I would like to address for a moment the commerce clause argument. We submit --
QUESTION: Let me ask you this. How much a necessity for government was there in the Puyallup reservation, which by the time the cases came here that were written in the seventies consisted of a freeway from Tacoma to Seattle?
MR. NORDHAUS: I think in some cases the necessity for a strong government is not clear, but I think in the case of this tribe, and for instance, the Navajo Tribe, the case for a strong tribal government is -- it can't be denied. The Navajo reservation covers almost 19,000 square miles, bigger than eight of the states. It covers -- it extends beyond the borders of three different states. I would venture that the state of Arizona would not -- would be very unhappy if Arizona had to attempt to govern the Navajo reservation. The Navajo reservation has a tremendous budget, and a tremendous governmental structure. It couldn't be --
QUESTION: And a tremendous income from oil.
MR. NORDHAUS: Well, but that, of course, there is a great deal of poverty, too, Your Honor, and that income from oil is the property of the landlords rather than a governmental revenue. But on the commerce clause arguments, Your Honor, we submit that this tax is no different from any other severance tax. It is a privileged tax on a local activity of producing oil and gas, and it is measured by the volume of production at the wellhead. All production is sold at the wellhead except pipeline production.
The Petitioners attack the provision or -- that the tax rate is applied to oil and gas sold or transported off the reservation. That means that the tax rate is applied to gas sold on the reservation or transported off the reservation without sale by a pipeline producer. The purpose of that particular clause, transported off the reservation, is to reach pipeline production which is not sold actually until -- for interstate gas until it reaches the California border and it is sold to Pacific Light and Electric Company.
The key to the interpretation of the tax and to the -- and to answer the argument that it is discriminatory against off reservation commerce is that the exemption applies only to royalty gas or condensate taken by the tribe and used by the tribe, meaning the tribal government. In fact, gas and oil transported off the reservation for processing and returned for consumption by tribal members is taxed. There is no claim by Petitioners that the tribal tax favors New Mexico consumers as opposed to out of state consumers. The claim is that it favors off-reservation consumers, and there we get into an Indian commerce clause claim which has really no reference to discrimination against interstate commerce.
Thank you, Your Honor.
CHIEF JUSTICE BURGER: Very well, Mr. Nordhaus.
ORAL ARGUMENT OF LOUIS F. CLAIBORNE, ESQ., ON BEHALF OF THE RESPONDENTS
MR. CLAIBORNE: Mr. Chief Justice, and may it please the Court, it need not be necessary to rebut what is at the end of the day the allegation of the Petitioners, that is to say, that this Court in several of its recent decisions was grossly misusing language or engaged in loose talk when it spoke of inherent tribal sovereignty, when it spoke of residual tribal sovereignty, and specifically sovereignty over its territory, that those words, first declared in the unanimous decision of the Court in the Missouri case.
By that, the Court surely did not mean the sort of power that a country club has over its members, to determine membership, to assess fees against the members, to enact rules of conduct, discipline the members --
QUESTION: But it didn't mean, either, the power that a state has over its residents, did it?
MR. CLAIBORNE: Not precisely, Mr. Justice Rehnquist, but certainly some governmental power. We then reach more recent -- two of the most recent decisions of this Court --
QUESTION: Mr. Claiborne, before you reach the more recent decisions, would you -- could I just ask your views on the question whether this power to tax by this tribe existed before the reservation was created?
MR. CLAIBORNE: The power to try non-members, Justice Stevens --
QUESTION: The power to tax non-members, yes.
MR. CLAIBORNE: -- I would have found difficult to assert without a territory over which territorial sovereignty of that tribe could be exercised, and this leads me to comment on the question asked by Justice O'Connor whether the power to tax has a territorial aspect. I would answer yes in exactly the same way that the municipal or state power to tax is normally limited to a territory.
It isn't based on any power to exclude. A city or a state cannot exclude people who come there, but it can only tax those that either do business there, have some nexus there, or reside there. So it is, it seems to me, with respect to the tribal power to tax.
QUESTION: And would you say that that power, if you say it did not pre-exist the reservation, what about someone who was in that territory before and might claim the benefit of that proviso in the Executive Order creating the reservation?
MR. CLAIBORNE: That could be read as meaning only property rights subject to regulation, taxation, and the other exertion of governmental power by the new sovereign, the tribe, or it could be read to save -- to grant an exemption from even such governmental regulation. Fortunately, we do not have that problem with respect to this case. Here, the tribe is clearly exerting a governmental power which was in existence at the time these lessees obtained their interest.
They may not have appreciated that it would be exercised against them, but that is precisely the situation of the New York Transit case, reported in 303 US. The City of New York there sought to impose 20 years later on the lessees of rapid transit a tax, and the lessees said, when we obtained our lease you hadn't been granted this power by the state of New York, and certainly we thought we had contracted against it.
This Court held unanimously not so. This was a governmental power of taxation. The contract did not expressly provide against its later imposition. Accordingly, the city was entitled to impose that tax, however unanticipated it may have been by the lessee at the time of the contract.
QUESTION: Just one final question, if I may. I take it you also do not rely on the 1934 Act as the source of power for the power to tax. I didn't understand you to in your latest brief.
MR. CLAIBORNE: Quite right, Justice Stevens. We follow the teaching of this Court that the inherent powers, governmental powers of tribes are not those for the most part which had been delegated by the United States, but rather powers which survive from aboriginal sovereignty, and which attach to a particular territory when the United States, by treaty or by Executive Order or by Congressional action, defines that territory.
QUESTION: But then what was the status of the Jicarillas between 1848 and the Treaty of Guadalupe-Hidalgo in 1870 when the Executive Order reservation was established?
MR. CLAIBORNE: They were, Justice Rehnquist, a sovereign tribe without a defined territory.
QUESTION: Well, why were they sovereign?
MR. CLAIBORNE: Sovereignty has other aspects but the power of taxing on Indians within a defined territory.
QUESTION: But what made them sovereign?
MR. CLAIBORNE: What made them sovereign among other things was the recognition given them by the European sovereigns who decided, as they might not have decided, to recognize the sovereignty of the aboriginal inhabitants of the continent.
QUESTION: Well, if Europe were to recognize Arlington County as a sovereign, would that make Arlington County sovereign?
MR. CLAIBORNE: More relevantly, the United States, with respect to that territory which it gradually took unto itself, chose, perhaps it wasn't required to, but it chose to recognize the native inhabitants as enjoying a sovereignty. That is a doctrine which has been vindicated in this Court for 200 years. I had not thought it now open to question.
QUESTION: What was the relationship of this tribe to Mexico at the earlier point? Was it --
MR. CLAIBORNE: Mr. Chief Justice --
QUESTION: Was it sovereign --
MR. CLAIBORNE: I am not --
QUESTION: -- vis-a-vis Mexico?
MR. CLAIBORNE: -- well aware of the views of the Mexican government with respect to the native Indians. I would point out --
QUESTION: Well, isn't that an important part of this case?
MR. CLAIBORNE: Well, Mr. Chief Justice, I would point out that this Court, in deciding Williams versus Lee, the seminal modern case on the subject of Indian sovereignty, involving the Navajo reservation in Arizona, took no exception to the proposition that because this was former territory of Mexico, somehow the Navajos had lost the sovereignty which other tribes throughout the nation enjoyed, and there Mr. Lee was required to submit himself to tribal authority, and of course, the United States entered into a treaty with the Navajos, thereby recognizing them as a sovereign entity.
I should stress, because it has been passed by, that the power to tax was, of course, recognized in the Colville case, and with respect to the Colville Indians, whose reservation is not derived from the Treaty of Point Elliott, but is simply an Executive Order reservation of no greater status than the Jicarilla reservation here, nor was that power to tax in any way related to the power to exclude those who bought cigarettes from the reservation. Many of them lived and were entitled to remain within that reservation.
Now, I should say something about what I thought to be the only question in the case, which was whether Congress in 1927 took away the inherent power which up to that date the tribe clearly enjoyed to tax non-Indians within these circumstances, within this territory. Plainly, there is nothing on the face of the 1927 Act that accomplishes this result. There is nothing arguably inconsistent about granting the power of taxation to the state, and leaving in existence a concurrent power in the tribe.
The Colville case teaches us that such two taxing powers may indeed coexist. There is no inconsistency in a provision which allows the same sovereign to both share the royalties and to enjoy taxing power. The 1920 Act General Leasing Act, with respect to federal lands, does precisely that with respect to the states, who may? ?? severance taxes and enjoy 50 percent of the federal royalties.
QUESTION: Well, tell me, Mr. Claiborne, is anything in the way of Congressional action that support the Secretary's approval of this tax in this case?
MR. CLAIBORNE: As Justice O'Connor pointed the IRA requires the Secretary to approve tribal constitutions. In submitting those -- in making his conditions upon the constitutions which he will app??? appears at the time, judging from the uniform provision them, that one of those provisions was that any taxing ordinance bearing on non-Indians should be submitted before it was implemented. So it was here.
Accordingly, we have Congress requiring secretarial approval of tribal constitutions, that constitution requiring Secretarial approval of any ??? ordinance bearing on non-indians, and finally, Secretary's approval in this case of the very ordinance. That common pattern, and it --
QUESTION: Well, does that negative any? ?? that the 1927 Act in any way prevented what happened.
MR. CLAIBORNE: We don't say that Congress his in 1934 clarified any doubt that existed in 1927, because we say that in 1927, at the end of the day, Congress did a very simple thing. It said, here are these Executive Order reservations with respect to which oil and gas leasing is not presently available. They thought of several schemes, all of which schemes permitted the state to tax the lessee's interest. They wanted to give the state something more, a share of the royalties or a power to tax the royalty interest, the Indian interest.
They finally realized that here was a model ready made, the 1924 Act, which provided with respect to treaty reservations that the state might tax the whole of the production, and the Indians would get the whole of the royalty. In the end, that is precisely the pattern that was followed.
It follows that the 1927 Act no more than the 1924 Act was focusing in the slightest on Indian taxing power, not a very lively notion in that day, for historic reasons which we elaborate in our brief.
QUESTION: If the Secretary had declined to approve, what would be the status of this taxing power?
MR. CLAIBORNE: In this case, it would plainly be impermissible for the tribe to implement it since its own constitution requires Secretarial approval for such ordinances.
QUESTION: But that would be by virtue of an inhibition which it had placed on itself in its constitution, would it not?
MR. CLAIBORNE: But which may have been, Mr. Chief Justice, imposed upon it in order to win approval for its constitution. At all events, I would suggest that there remains residual power in the Secretary under Section 2 of Title XXV, Section 9, to disapprove, and certainly to refuse to implement any ordinance enacted by a tribe which bears on others than members, and which he has not approved and would affirmatively disapprove, that that residual power could be exercised in any such case.
There was, of course, no occasion to do so here, the Secretary believing that the tribe was correctly exercising a power which Congress had not expressly granted it, but which Congress had not taken away.
Finally, on the 1927 Act, let me point out the irony of the argument of the Petitioners. This is legislation expressly designed to aid the tribe which under the Secretary of the Interior's action in 1922 was getting no part of the royalties from the oil and gas leasing. Congress sought to remedy that by granting Executive Order tribes exactly the same benefits from their lands as treaty tribes.
It would be strange to read into such legislation against all the canons of construction an implied by wholly silent repeat of tribal power.
I submit, Your Honor.
CHIEF JUSTICE BURGER: You have about two minutes left, counsel.
ORAL ARGUMENT OF JASON W. KELLAHIN, ESQ., ON BEHALF OF THE PETITIONERS - REBUTTAL
MR. KELLAHIN: Mr. Chief Justice, and may it please the Court, there are several questions that have been raised here in the argument which I would like to address very briefly.
The question directed by Justice Stevens, for example, was, did the power to tax exist before the creation of the Jicarilla reservation, and Mr. Claiborne has said in his opinion it did not, because it is territorial, and I think he is exactly right there.
QUESTION: You mean the power to tax non-Indians?
MR. KELLAHIN: Non-Indians. Yes, sir.
QUESTION: They had the power to tax their own, whether they --
MR. KELLAHIN: If they had an organization which could have imposed such a tax.
QUESTION: Yes, but it isn't necessarily territorial.
MR. KELLAHIN: As among their own members, that is correct, Justice White.
MR. KELLAHIN: But that point was addressed at some length by Justice Seth in his dissent in the Tenth Circuit, which appears at Page 167 of our Joint Appendix. He discussed the origin of the Jicarilla Tribe and the nature of their tribal organization at the time and prior to their being placed on the reservation.
Now, the reservation was created from public lands which belonged to the United States, and it was not tribal lands at all. The -- If the power to impose a tax or if the sovereignty they are talking about did not exist, and the sovereignty over non-Indians did not exist prior to the creation of the reservation, then where did that power come from? It would have to be simply a territorial right which brings us back to our argument that they have control over their reservation, they have the right to say who is going to come on the reservations just as do the treaty tribes or those created by legislation, and they can control in that manner and tax those coming on.
Thank you very much.
CHIEF JUSTICE BURGER: Thank you, gentlemen. The case is submitted.
(Whereupon, at 2:47 o'clock p.m., the case in the above-entitled matter was submitted.)