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Chairman Carl Venne of the Crow Nation of Montana, testifying before a May 2008 meeting of the Senate Committee on Indian Affairs, had a clear vision for his nation’s 12,000 citizens, many of whom reside on the tribe’s remote, 9 million-acre reservation. The future, he said, lies with the more than 10 billion tons of high-grade coal on Crow lands, about 3 percent of the world’s coal resources. 

“Given our vast mineral resources, the Crow Nation can, and should, be self-sufficient,” says Venne. “My administration desires to develop our mineral resources in an economically sound, environmentally responsible manner consistent with Crow culture and beliefs. Crow people are tired of saying we are resource rich and cash poor.

“My larger vision,” Venne said, “is to become America’s energy partner and help reduce America’s dependence on foreign oil.”

Some 500 miles away in Belcourt, North Dakota, Jessie Cree, an elder with the Turtle Mountain Band of Chippewa, spoke of his tribe’s plans to harness energy generated by winds that blow over the vast prairie.

“It has spirituality,” Cree told the Boston Globe newspaper. “You can’t see the wind blow, but you can see whatever it hits… the old people that were spiritual, they were able to see the wind. They would be able to see the spirit of the wind.”

“Wind blowing through Indian reservations in just four northern Great Plains states could support almost 200,000 megawatts… enough wind power to eradicate all fossil fuel-burning power plants in the U.S.,” said environmental activist Winona LaDuke, a Anishinaabe (Ojibwe) from Minnesota.

Whether it is the winds that blow in the North, oil and gas in the Great Plains or coal, uranium and solar power in the West and Southwest, American Indians are close to reaping huge economic gains from the voluminous energy resources on largely remote tribal reservations.

U.S. Department of Energy experts believe 10 percent to 14 percent of the nation’s traditional fossil fuels, gas and renewable energy resources can be found on the 59 million acres that make up the country’s Indian reservations, land held in federal trust and deeded to tribal governments and individual tribal citizens.

The first Americans intend to utilize those resources in an environmentally friendly manner that respects cultural and spiritual beliefs and respect for the land.

Perhaps most important, tribes view ownership and management of energy resources as a means of strengthening sovereignty and self-governance and building the foundation for a sustainable future for future generations.

With President Barack Obama’s pledge to reduce the country’s dependence on foreign oil, the nation’s indigenous peoples are poised to reap billions of dollars in energy production in the coming decades. Some predict revenues will exceed the nearly $27 billion tribes generated in 2007 from government casinos.

“Maybe not in the next 10 years, but in the next 20 years, yes, I believe it will,” says A. David Lester, executive director of the Council of Energy Resource Tribes of Denver, Colorado, and a citizen of the Muscogee Cree Nation.

There is justice in the energy opportunities in Native America as most tribes with conventional and renewable energy resources are located on remote reservations and have not benefited greatly from casinos. Seventy percent of revenue from tribal gaming is generated by 15 percent of the Indian casinos owned by small tribes in urban areas.

DOE geological surveys estimate there are 5 billion barrels of oil, 37 trillion cubic feet of natural gas and 58 billion tons of coal on Indian reservations. About 25 percent of the known onshore oil and gas resources are on tribal lands. Yet only about 4 percent of the tribal energy resources are in production.

In terms of renewable resources, geological experts say of the 360 reservations in the lower 48 states, 118 have biomass potential and 77 have wind resources.

The full potential of energy resources is difficult to gauge. Of the 15 million acres of potential tribal energy and mineral resources, only 2.1 million acres are being explored and developed.

“There are reserves in Indian Country we don’t know about,” says former U.S. Senator Benjamin Nighthorse Campbell, a citizen of the Northern Cheyenne Nation. “Only 30 percent of Indian Country has been adequately explored.”

New Tribal Paradigm
The opportunities in energy production on tribal lands extend far beyond economics, as great as they may be.

“Tribal leaders have a different vision of the future,” Lester says. “They view energy as a means of achieving more and stronger self-governance and a pathway to greater tribal prosperity. Energy is the means to achieve the goal, not the goal itself.”

A key component of President George W. Bush’s 2005 Energy Policy Act is the creation of Tribal Energy Resource Agreements, or TERAs, which enable tribes with adequate governmental structures greater authority in negotiating agreements with private utility companies and assuming ownership and management of energy production. The Southern Ute Tribe of Colorado, which owns a multibillion-dollar methane gas industry, is a prime example of what a tribe can accomplish when it controls its energy destiny.

“We believe TERAs will be a significant tool for tribes that would like to have more control over energy development decisions on tribal trust land,” says Robert W. Middleton, director of the Office of Indian Energy Economic Development. “There are several tribes that are already major players in domestic energy markets and we assume would take advantage of the additional flexibility of a TERA.”

Though well intended, Congress has not funded components of the Energy Policy Act to provide the education and training tribes need to build their capacity to own, manage and regulate energy development.

“There is no commitment from the federal government to build ownership and governmental capacity in Indian tribes,” Lester says.

It took 20 years for Indian tribes utilizing educational and training programs provided by the U.S. Environmental Protection Agency to establish and regulate environmental standards on tribal reservations. The U.S. Department of Energy must provide similar educational and training for energy resource tribes, Lester says.

As gaming tribes have been allowed to exercise their sovereign right to own, operate and regulate government casinos, energy resource tribes are seeking the opportunity to own, manage and regulate energy production.

“We need to open the door that allows Indian tribes to make significant contribution to the achievement of America’s national energy policy goals,” Lester points out.

Venne’s Vision
Although Venne died last month of heart failure, his vision remains. The Crow are partner with Australian-American energy in development of a $7 billion coal-to-liquids mine and plant project that would produce 50,000 barrels a day of clean diesel, jet fuel and naphtha. The project would create 4,000 construction jobs and 900 permanent jobs.

The Navajo Nation is close to beginning construction of a $3 billion, 1,500-megawatt coal burning power plant south of Farmington, New Mexico. The Desert Rock Energy Facility is expected to generate $52 million a year and create up to 400 jobs. Half the Navajo workforce is unemployed.

“Energy reserves on tribal lands represent the single largest source of untapped energy resources in the United States,” Navajo President Joseph Shirley says. “Tribal energy development is the future of U.S. domestic energy production as well as the future of tribal economic development. For Native nations the most pressing concern is the crushing poverty that renders impossible our dream of regaining our independence and preserving our language and culture. I believe the federal government and Native nations can come together as sovereigns and solve these problems in a mutually beneficial way.”

The Three Affiliated Tribes (Mandan, Hidatsa and Arikara) of the Fort Berthold Indian Reservation in North Dakota have taken steps to establish a TERA to expedite oil and gas leases on the nearly 1 million- acre reservation. There are 3.6 billion barrels of oil, 148 billion barrels of natural gas liquids and 1.85 trillion cubic feet of natural gas in what is known as the Bakken Oil Formation.

“We are poised at the brink of what could be the largest period of economic development in the history of the tribe,” says Chairman Marcus D. Wells Jr.

Renewable Strategies
About 100 tribes are exploring wind and solar energy, says Bob Gough, a founder of the Intertribal Council on Utility Policy, or COUP. Solar and wind energy resources in the Southwest and Great Plains are among the most abundant in the United States.

NativeEnergy partnered with the Rosebud Sioux of South Dakota in 2003 in building the first large-scale Native-owned wind turbine. The Rosebud Sioux and Citizens Energy Corporation of Boston, Massachusetts. have entered into a joint venture to develop a 100-megawatt wind turbine power project.

The Confederated Tribes of the Colville Reservation in Washington state is partners with Clipper Windpower of Carpinteria, California, on a plan to build a wind farm with up to 500 turbines. The tribe would eventually own and operate the wind energy company. The tribe also is planning to build a biomass energy facility at its Colville Indian Plywood and Veneer plant.

“Our goal is to bring benefit to the Colville Tribes while protecting and preserving our lands,” tribal energy coordinator Ernie Clark says. “The tribe is very excited about possible renewable energy developments, including wind.”

The Sisseton-Wahpeton Oyate is developing a wind farm on tribal trust lands in northeast South Dakota.

The Blackfeet Tribe of Montana is working with Anschutz Exploration Corp. of Denver to find oil along the Canadian border. And Native American Resources Partner of Salt Lake City, Utah, is investing hundreds of millions of dollars in energy projects on two other Montana Indian reservations.

“We don’t invest in companies doing business in Indian Country,” NARP Vice President Lynn Becker told the Great Falls Tribune. “We partner with tribes on energy ventures in which we both earn an interest.”

The Chippewa Cree Tribe is working with NARP to develop natural gas or wind power on the Rocky Boy’s Indian Reservation. And the Assiniboine and Sioux tribes on the Fort Peck Indian Reservation are working with NARP to develop resources of some 60 billion barrels of oil.

“Right now, we’re working on a partnership to start our own oil and gas company that will allow us to do our own oil and gas drilling,” Fort Peck Tribal Councilman Rick Kirn says.

National Indian Gaming Commission
The NIGC has had nearly 20 years of experience in not making up its mind what constitutes a Class II game. Its initial instinct was to prohibit all electronic forms of bingo and pull tabs. After growing courtroom losses, it modified that position, through a series of advisory opinions (non-binding) and 2002 regulations defining what designs were permissible for Class II use as “technologic aids,” and what constituted a “facsimile,” which requires a compact. Even following promulgation of those 2002 rules, however, the NIGC continued to issue confusing advisory opinions (non-binding) and undertook its ill-fated “classification standards.” Under the guise of clarification, those standards attempted to redefine the statutory definition of “bingo,” eliminated “games similar to bingo,” and created an intricate structure apparently designed to render Class II games commercially non-viable. Tribal interests invested thousands of hours in opposing the proposal, which was ultimately withdrawn-and is, therefore, non-binding. The NIGC is due for some significant personnel changes. One commissioner position has been vacant for more than a year, and should be filled before too long. The chairman’s three-year term has now lasted more than six years, and he expects to leave as soon as a replacement can be nominated and confirmed. The direction and ambition of a reconstituted commission will bear watching.
 

States
States have neither the authority nor the expertise to determine whether a Class II game complies with the provision of the Indian Gaming Regulatory Act. Most such efforts focus on a game’s appearance, and on whether, from an outside perspective, it looks, plays and feels like a Class III game. Some years ago, when the United States Department of Justice proposed a similar test-that IGRA did not permit games that were “too fast, fun and lucrative”-even the NIGC fought back. In recent months, some states have attempted to apply the provisions of the NIGC’s withdrawn criteria for Class II games. But those criteria never made it to law, and if the NIGC cannot enforce those standards, even less can the states do so. Further, the states have no right to enforce any standards. When Congress enacted the Indian Gaming Regulatory Act, it did not do so in a vacuum. The Supreme Court had acknowledged tribes’ inherent regulatory authority over bingo operations on their tribal lands, exclusive of state regulation. In the IGRA, Congress took away some of that exclusivity as to a gaming category it called Class III. To operate Class III games, therefore, a tribe must reach agreement with a state over Class III regulatory provisions or, when an agreement cannot be reached, enter the labyrinthine process of litigation and administrative challenges. But Congress did not abrogate any measure of tribal exclusive regulation of Class II games, and provided an oversight role only to the NIGC. State power over Indian gaming is limited to Class III. Since the United States Supreme Court invalidated tribes’ ability to enforce good faith compacting (Seminole Tribe of Florida v. Florida), states can stonewall compact negotiations, or impose unfair compact demands without judicial retribution. Their power is substantial, but it is limited to Class III.

Tribes
Tribes have always been the primary regulators of Class II gaming. Tribal gaming regulatory agencies staff the front lines in assuring the integrity and fairness of the tribal facility, and in that role, have learned much about the functioning of Class II games. Class II technologic aids were developed entirely in response to tribal needs to enhance Class II gaming. In general, such gaming systems were needed in jurisdictions that refused to enter into compacts to permit tribal Class III gaming. Tribal regulatory agencies developed and implemented rules necessary to protect the interests of both the tribe and the gaming public. The first, because the purpose of the IGRA is to provide for tribal economic development. The second, because the public will not long return to a crooked facility. Over the years, Class II gaming has matured at much the same rate as technology in other comparable areas. Tribal gaming regulators have reviewed and evaluated each new game, and have dealt with the inevitable bugs and fixes. That expertise was manifest in the advice provided to the NIGC in connection with the MICS and technical standards proposals. That same expertise can be utilized to provide a better foundation for understanding the proper classification of technological aids to Class II games.

n October 16-17, 2008, the Arizona State University School of Law hosted a conference at Fort McDowell Casino to commemorate and critically examine the 20 years of Indian gaming under the 1988 Indian Gaming Regulatory Act. The event attracted scholars, policy makers and tribal representatives from around the country, many of whom had participated directly in the creation and implementation of the act. Our paper examined the economic impacts of Indian gaming under IGRA and complemented the political work presented by other academics whose work examined the ways that IGRA resolved specific legal and regulatory dilemmas and allowed tribes to pursue Class III gaming without fear of federal criminal prosecution. An excerpt from the paper appears here:

The Growth of Indian Gaming
In recent years the NIGC has regularly released tables and charts reporting the gross gaming revenues of Indian casinos-that is, the total revenues net of prizes paid for every Indian bingo hall and casino across the country. Predictably when these data are released, commentators note the burgeoning Indian sector of America’s growing gambling industry.

Upon the release of the latest gaming revenue figures, which reached $26 billion in 2007, the commission chairman, Philip N. Hogen, noted, “The continued growth [of Indian gaming revenue] is significant considering recent economic struggles throughout the country. The Indian gaming industry has experienced tremendous growth since the inception of the Indian Gaming Regulatory Act 20 years ago in 1988.”
    The numbers warrant Hogen’s accolades of “significant” and “tremendous” (Chart 1). In inflation-adjusted terms, Indian gaming exploded more than a hundred-fold from $171 million in 1985 to $26 billion in 2007, for an average compound growth rate of 26 percent per year after inflation. As the light blue line in Chart 1 indicates, Indian gaming grew rapidly in comparison with the commercial casino sector as well, jumping from 2 percent of its size in 1988 to more than three quarters in 2007. Back in the opening days of bingo halls at Penobscot, Seminole, Shakopee and elsewhere, few observers had any inkling that such growth was in store for Indian Country. Yet while the growth of Indian gaming appropriately deserves its many superlatives, growth has not been uniform over time. (See fig. 1.)

To the human eye, the growth of Indian gaming revenue in the chart appears simply “exponential.” That it is, but there is more than meets the eye: the exponential growth is not consistently so. When the same data is portrayed on a log scale, wherein the intervals between grid lines change from constant increments in the chart to constant proportions, it becomes clear that the pace of Indian gaming growth had three major phases. On the log scale, steady rates of compound growth in Indian gaming revenue appear as straight lines, and there are three roughly straight-line periods in the graph. Up until 1988, compound annual revenue growth was modest-in the single digits. For the five years beginning in 1988, growth leapt to an average of 79 percent per year (light blue line in the chart). And beginning in 1993, growth cooled substantially to a steady 15 percent per year over the 1993-2007 period. Virtually no growth took place in the last of those years: growth was 0.4 percent after inflation. (See fig. 2.)

In fig. 2, the log scale shows steady compound growth rates as straight lines.

Abrupt corners in a graph like fig. 2 beg further examination. That Indian gaming grew quickly in the five years after IGRA probably does not strike knowledgeable participants from that time as news, but the period when that growth took place is striking in retrospect. The Supreme Court decided Cabazon in 1987, and IGRA became law in 1988. The coincidental uptick in growth points to the power of these actions to unleash capital flows-of both financial and human capital-to Indian Country. Clearly, Cabazon certified to the outside world the civil and regulatory freedoms tribes had been asserting, but did IGRA help too?

Legal and political observers, most importantly tribal leaders and representatives, often (and correctly) note that IGRA constrained American Indian powers of self-determination in gaming relative to what Cabazon afforded. But in a very real sense IGRA also lifted from Indian gaming the heavy burdens of political and regulatory uncertainty. 

Of course, the effect was neither complete nor uniform. Gubernatorial recalcitrance held down investment in California for more than a decade after IGRA’s passage. “Friendly” and unfriendly lawsuits in Washington, New Mexico and elsewhere were necessary to settle the nature of compacting authority, game types, revenue sharing, and a host of other issues relevant to the Indian gaming investment climate. The Seminole decision, of course, vitiated a central congressional assumption in the compacting framework. Notwithstanding its shortcomings, however, IGRA went far in organizing the process by which state and tribal claims could be resolved.

Thus to the tribal leader’s correct observation that IGRA constrained Indian nations, the economist raises his familiar question: Compared to what? Wouldn’t Indian gaming revenue have continued at a slow pace of growth under a Cabazon-only rubric as it had done under a Butterworth-only framework?

Recall that state governors and members of Congress were up in arms about regulation and competition against non-Indian casinos. For how long would tribal governments have suffered slow gaming growth, and at what loss of net present value for tribes? Any delay in the arrival of the steep upward slope indicated by the light blue line in fig. 2 would carry consequences in the tens of billions of dollars for Indian Country.

It may forever be impossible to disentangle IGRA’s various abetting and hindering influences from Cabazon‘s broad acknowledgment of tribal regulatory authority because the two come so close together in time, but the acceleration in growth visible in fig. 2 raises the bar for those who lament the state compacting provisions in IGRA.

Yes, IGRA constrained the tribal sovereignty that is so essential to American Indian economic development. Yes, IGRA’s shortcomings as a framework for accommodating tribal and state interests effectively and efficiently are plainly evident.

On the other hand, is not five consecutive years’ worth of 79 percent compound annual growth a necessary proof that IGRA made investors-and tribes themselves-feel much more secure about directing resources toward Indian gaming development? How intensely were electronic gaming machine companies investing in Class II technologies before IGRA? How cheap and accessible was the capital necessary to create a Foxwoods, a Mystic Lake, or an Emerald Queen prior to IGRA, if at all? How readily were state governments cooperating to build highway off-ramps to Indian reservations? Good institutions of government make investors feel secure by reducing political, legal, and regulatory uncertainty, and IGRA, flawed as it was, created an environment that clarified tribes’ role in the federalist matrix of government-to-government relations in a way that was more than just good enough to get that job done. Would Cabazon alone have done as much? If so, when?

The second “corner” of fig. 2 comes in 1993 and presents puzzles in itself and perhaps even challenges the above explanation for the significant uptick in 1988. If IGRA created beneficial investment conditions in 1988, did something make them less attractive after 1993? If so, what? That year brought with it a new administration, and it is conceivable that BIA procedural changes introduced delays or uncertainties. A more plausible scenario is that in May 1994-the year growth fell substantially-Connecticut and Mohegan signed their gaming compact, which among other things extended Mashantucket Pequot’s 25 percent revenue-sharing terms to a second tribe. Perhaps that compact introduced higher stakes into compact negotiations around the country, thereby introducing uncertainty.

On the other hand, that compact extended statewide exclusivity to Mohegan, which would tend to accommodate growth in investment. It may also be the case that the uptick in 1988 was an accounting anomaly because revenues prior to IGRA were not centrally monitored as closely as they were after IGRA’s passage.

This explanation may be weakest because an improvement in the accuracy of reporting would probably not begin and end abruptly over five years. Whatever their underlying causes, the discontinuities in the revenue trend in Chart 2 are remarkable in their own right, and an invitation to more investigation.

The ASU conference looked retrospectively at 20 years of Indian gaming under the frameworks of IGRA, describing jurisdictional conflict, legal and regulatory unpredictability, and political change. As tribes and states look to the future, the global recession and financial market collapse compound the uncertainties.

Nonetheless, the story of economic growth achieved under a framework that settled the place of tribes in the federal system-at least for a few issues and a few years-holds out the promise that Indian gaming can grow rapidly again under conditions that the tribes and the federal government themselves have the power to create. With luck, the states will recognize their enlightened self-interest in supporting such growth as well.