One perspective on tribal economic development

The Denver Post has reprinted a piece by one observe about the Southern Utes fantastic success at fighting decades of oppression and poverty but asks the question: at what cost?

The tribe has done so well at its own oil and gas business that its wholly owned subsidiary, Red Willow Offshore, LLC, has made a splash in the oil business in the Gulf of Mexico in recent years, typically partnering with others on deepwater endeavors.

“Less than a century ago, the Southern Utes were barely hanging on, squeezed onto an unremarkable sliver of reservation land, a new and foreign way of life thrust upon them. Even as late as the 1950s, many had no running water or noticeable income. But today, as the bidding at the Superdome showed, the once-impoverished tribe is a financial powerhouse. With tribal businesses in 14 states, ranging from Gulf crude to upscale San Diego real estate, the 1,400 or so tribal members are, collectively, worth billions.

They didn’t strike it rich on casino gambling. Instead, the Southern Utes built their empire slowly, over decades, primarily by taking control of the vast coalbed methane and natural gas deposits that lie under their land. They’ve achieved cultural, environmental and economic self-determination through energy self-determination — a feat rarely accomplished, whether by Indians or non-Indians.

In the process, however, the Southern Utes have gone far beyond self-determination. These days, the tribe’s oil and gas operations extend to other reservations as well as to private land, sometimes to places whose own residents oppose it. The tribe’s influence reaches to Washington, D.C., affecting federal energy policy. . . .

In 1896, the Southern Utes started to fight back, using the weapons of their former enemies. A long series of lawsuits eventually brought multimillion-dollar judgments in the tribe’s favor and stronger rights to water, land and hunting grounds. “With each encounter,” writes Richard Young in “The Ute Indians of Colorado in the 20th Century,” “they became more confident in their ability to present their case and to maneuver among the various echelons of the vast and powerful federal government.”

Energy became the battlefield in the 1960s. Thanks to bad federal policy and lax oversight, many Southwestern tribes, including the Hopis and Navajos, were getting a raw deal. When a company wanted to gouge a reservation’s land for coal, or drill for oil and gas, it would negotiate not with the tribe, but with the Department of Interior, which leased the land to the highest bidder. The tribes had to approve the leases but were otherwise powerless, and they generally lacked the expertise and data to make good energy decisions. The federal government managed, audited and collected royalties on the leases — or at least it was supposed to — without any input from the tribe in question.

. . . oil and gas companies had been drilling on the Southern Ute Reservation for two decades, shipping oodles of gas off the land. The tribe received less than $500,000 per year in royalties, a paltry fraction of what the oil companies were making — and far less than it was owed.

The energy crisis brought high prices and sparked a drilling, strip-mining, oil shale frenzy. The Southern Utes — sitting on one of the richest gas fields in the country — could have cashed in by signing over the rights to drill the reservation. Instead, in 1974, the tribal council took Maynes’ advice and imposed a moratorium on all new mineral leases. A year later, Burch and the Southern Utes joined 24 other tribal leaders to form the Council of Energy Resource Tribes, or CERT to consolidate their political power.
“Burch and his cohorts were just . . . great tacticians and strategists,” says David Lester, a national leader in Native American economic development since 1969 and leader of the Council of Energy Resource Tribes since 1982. “Their motive wasn’t money, although money was important to them. . . . The money was a means to higher ends. It was about protecting the tribe and developing a foundation and developing a cultural community distinct from surrounding communities.” . . .

When Red Willow took over 54 gas wells in 1995, it quadrupled their production within nine months. And the economics changed radically. If an outside company operates a gas well on a reservation, the state and county can impose property and severance taxes on it, and the feds can tax the company’s income. This not only cuts into a company’s profits, it also leaves less for the tribes to tax. But when the tribe takes over a well, it’s exempted from many of the outside taxes, cutting overhead by as much as 30 to 40 percent. “That gave the tribe a huge competitive margin,” says Lester. “Plus, they hired experienced hands to run the company.” . . .

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