Transcript

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.

APPEARANCES:

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.

PROCEEDINGS

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.

Thank you.

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.

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, 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.

QUESTION: Yes.

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.)