# Record and brief — United States v. Navajo Nation

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0086%3A0

## Record

- **Collection:** Supreme Court brief
- **Document type:** Record and brief
- **Published:** January 1, 2009
- **Citation:** 556 U.S. 287

## Text

eens aw Paes CU 7 FS OC Oe

No. 07-1410

Title: United States, Petitioner
Vv.
Navajo Nation
Docketed: May 13, 2008
Lower Ct: United States Court of Appeals for the Federal Circuit
Case Nos.: (2006-5059)

Decision Date: September 13, 2007
Rehearing Denied: January |4, 2008
Questions Presenied

~~~Date~~~ ~~~~~~~Proceedings and Orders~~~~~~~~~~~~~~~~~~~~~

Apr 3 2008 Application (07A817) to extend the time to file a petition for a writ of certiorari from
April 13, 2008 to May 13, 2008, submitted to The Chief Justice.

Apr9 2008 Application (07A817) granted by The Chief Justice extending the time to file until May
13. 2008.

May 13 2008 Petition for a writ of certiorari filed. (Response due June 12, 2008)

May 13 2008 Appendix of United States filed.

May 16 2008 Order extending time to file response to petition to and including July 14, 2008.

Jul 11 2008 Order further extending time to file response to petition to and including August 4, 2008.
Aug 4 2008 Brief of respondent Navajo Nation in opposition filed.

Aug 20 2008 DISTRIBUTED for Conference of September 29, 2008.

Aug 21 2008 Reply of petitioner United States filed. (Distributed)

Oct 1 2008 Petition GRANTED.

Oct 22 2008 The time within which to file the joint appendix and petitioner's brief on the merits is
extended to and including November 26, 2008.

Oct 22 2008 The time within which to file respondent's brief on the merits is extended to and including
January 9, 2009.

Nov 25 2008 Joint appendix filed. (Jt. Appendix in three volumes). Statement of costs filed.
Nov 26 2008 Brief of petitioner United States filed.

Dec 3 2008 Brief amici curiae of Peabody Western Coal Company, and Southern California Edison
Company filed. (Distributed)

Dec 5 2008 CIRCULATED.
Dec 8 2008 SET FOR ARGUMENT ON Monday, February 23, 2009

Jan 5 2009 _ Letter from counse! for respondent seeking permission to lodge copies of a brief cited to
in respondent's brief on the merits.

Jan 92009 __ Brief of respondent Navajo Nation filed. (Distributed)
Jan 162009 Record received from the U.S.C.A. for the Federal Circuit. (1 box)

Jan 16 2009 Brief amici curiae of Former Secretaries of the Interior, Ceci! D. Andrus. ei al. filed
(Distnbuted)

Jan 16 2009 Brief amici curiae of Law Professors filed. (Distributed)

Jan 16 2009 Brief amici curiae of New Mexico, Arizona, and Utah filed (Distributed)

Jan 16 2009 Brief amici curiae of National Congress of American Indians, et al. filed. (Distributed)
Feb 9 2009 Reply of petitioner United States filed. (Distributed)

weer we Fe wereellwserehU mhTTChUcTCc TO aE oe

Feb 23 2009 Argued. For petitioner: Edwin S. Kneedler, Acting Solicitor General, Department of
Justice, Washington, D.C. For respondent: Carter G. Phillips, Washington, D.C.

Oe ee ee ee ee ee es

~~Name~~~~~~~~~~~~~~~~ ~Address~~~~~~~~ ~~~ ~~~ ~~~ ~~Phone~~~
Attorneys for Petitioner:
Edwin S. Kneedler Acting Solicitor General oe _
Counsel of Record United States Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, DC 20530-0001
Party name: United States
Attorneys for Respondent:
Carter G. Phillips Sidley Austin LLP —
Counsel of Record 1501 K Street, N.W.
Washington, DC 20005
cphillips@sidley.com
Party name: Navajo Nation
Other:
Reid Peyton Chambers Sonosky Chambers Sachse Endreson & Perry ape oe.
1425 K Street, NW, Suite 600
Washington, DC 20005
Party name: National Congress of American Indians, et al.
Charles G. Cole Steptoe & Johnson LLP posers <>

1330 Connecticut Avenue, N.W.
Washington, DC 20036
Party name: Peabody Western Coal Company, and Southern California Edison Company

Richard B. Collins Professor of Law * a )492-
University of Colorado
401 UCB
_ Boulder, CO

Party name |.aw Professors

Quinn Emanuel Urquhart Oliver & Hedges, (212) 849-
LLP 7000

51 Madison Avenue, 22nd FI.

Kathleen M. Sullivan

Se Vynrws Swe wrUlKE Trew

——-—-=
New York, NY 10010
kathleensulli van@ uinnemanuel com

Party name: Former Secretaries of the Interior, Cecil D. Andrus, et al.

David K. Thomson Deputy Attorney General coe -

Office of the Attorney General of New Mexico
P.O. Drawer 1508
Santa Fe, NM 87504-1508
dthomson@nmag.gov

Party name: New Mexico, Arizona, and Utah

PETITION
FOR

WRIT OF
CERTIORARI

No.

Jn the Supreme Court of the United States

UNITED STATES OF AMERICA, PETITIONER
v.
NAVAJO NATION

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

PAUL D. CLEMENT
Solicitor General
Counsel of Record
RONALD J. TENPAS
Assistant Attorney General

EDWIN S. KNEEDLER
Deputy Solicitor General

ANTHONY A. YANG
Assistant to the Solicitor
General
ELIZABETH A. PETERSON
Attorney

Department of Justice
Washington, D.C. 20530-0001
202) 514-2217

QUESTIONS PRESENTED

The Indian Mineral Leasing Act of 1938 (IMLA), 25
U.S.C. 396a et seq., and its implementing regulations
authorize Indian Tribes, with the approval of the Secre-
tary of the Interior, to lease tribal lands for mining pur-
poses. In a previous decision in this case, United States
v. Navajo Nation, 537 U.S. 488 (2003) (Navajo), this
Court held that the Secretary’s actions in connection
with Indian mineral lease amendments containing in-
creased royalty rates negotiated by the Navajo Nation
did not breach a fiduciary duty found in IMLA or other
relevant statutes or regulations. The court of appeals
held on remand that the Secretary’s conduct breached
duties linked to sources of law that had been briefed to
this Court but not expressly discussed in Navajo. The
questions presented are:

1. Whether the court of appeals’ holding that the
United States breached fiduciary duties in connection
with the Navajo coal lease amendments is foreclosed by
Navajo.

2. If Navajo did not foreclose the question, whether
the court of appeals properly held that the United States
is liable as a mater of law to the Navajo Nation for up to
$600 million for the Secretary’s actions in connection
with his approval of amendments to an Indian mineral
lease based on several statutes that do not address roy-
alty rates in tribal leases and common-law principles not
embodied in a governing statute or regulation.

(1)

TABLE OF CONTENTS

Page
I ii ak id whe hia ese ates 6 dalek as uses l
EET: era RGD ERO BN Og pare Re eND l
Statutory and regulatory provisions involved ............. 2
ee i ain ieee anadaecneedreus ens 2
Reasons for granting the petition ...................... 15

A. This Court’s decision in this case foreclosed the
basis for liability adopted by the Federal Circuit .... 16
B. The court of appeals’ ruling, even if not completely
foreclosed by Navajo, is in any event flatly
inconsistent with Navajo and this Court’s decisions

forming the basis for Navajo .................000. 20
C. The court of appeals’ decision threatens serious
adverse consequences for the government ......... 32
IIT

NAVAJO NATION,
Respondent.

On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Federal Circuit

OPPOSITION BRIEF
PAUL E. FRYE CARTER G. PHILLIPS*
FRYE LAW FIRM, P.C. VIRGINIA A. SEITZ
10400 Academy Rd. NE SIDLEY AUSTIN LLP
Suite 310 1501 K Street, N.W.

Albuquerque, NM 87111 Washington, D.C. 20005
(202) 736-8000

LOUIS DENETSOSIE

ATTORNEY GENERAL

THE NAVAJO NATION

P. O. Box 2010

Window Rock, AZ 86515

Counsel for Respondent
August 4, 2008 * Counsel of Record

LRA ER A EEN A
WiLson-EPEs PRINTING Co., Inc. — (202) 789-0096 — WasnincTon, D. C. 20002

QUESTIONS PRESENTED

The Navajo Nation would restate the questions
presented as follows:

1. Whether United States v. Navajo Nation, 537
U.S. 488, 493 (2003), forecloses the court of appeals’
holding that the United States was liable for its
breach of fiduciary duties in connection with the
Navajo coal lease amendments based on treaties,
statutes and regulations not addressed by this Court
in that case.

2. Whether the court of appeals properly held that
the United States is liable to the Navajo Nation for
breaches of trust under statutes and regulations that
confer upon the Government day-to-day control and
supervision over all aspects of Navajo coal leasing
and development and that impose specific duties that
the Secretary of the Interior violated.

(1)

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ............000..000.000...00. i
TABLE OF AUTHORITIES .......0.. eee iV
NN as cain canneeensaties 1
COUNTER-STATEMENT OF THE CASE.......... 3
1. Statutory And Regulatory Frame-work... 3

2. Factual Background......................c0ceseseeees 10

BS. PrGGR PROOGGEIAIS..........60.ccccsesccssseccersscccesss 15
REASONS FOR DENYING THE PETITION ..... 17

1. THE DECISION BELOW IS .WHOLLY
CONSISTENT WITH NAVAJO'S_ RE-

RR ES as ep oe aNe os Ea sad Hee De orks 17

Ii. THE DECISION BELOW FAITHFULLY
APPLIES GOVERNING PRECEDENT....... 20

Ill. THIS CASE HAS LITTLE CONSE-
QUENCE FOR ANY OTHER CASE ............ 30
eR SEAS SAE eS ee 34
ADDENDUM A: 25 U.S.C. §§ 631-640 ............... 1
ADDENDUM B: 30 U.S.C. § 1300(a)-(i) ............. 8

ADDENDUM C: 25 C.F.R. pts. 211 & 216
ERS EE Ree 11

ADDENDUM D: 25 C.F.R. pt. 216 subpt. B
(1987) & 25 C.F.R. pt. 750 (1987) ..............0...... 51

(iii)

lv

TABLE OF AUTHORITIES

CASES Page

Austin v. Andrus, 638 F.2d 113 (9th Cir.
i 30

Brotherhood of Locomotive Firemen v.
Bangor & Aroostook R.R., 389 U.S. 327

a 33
City of Cuyahoga Falls v. Buckeye Cmty.
Hope Found., 538 U.S. 188 (20093)............. 20

Deakins v. Monaghan, 484 U.S. 193 (1988). 20
Eastern Shoshone Tribe v. United States,

ee ee III ctitrnisivindiiinaenpnéensenietanesene 33
Faragher v. City of Boca Raton, 524 U.S.
ERT RR IR eS N 25
Glover v. United States, 531 U.S. 198
ata iaaiiiiatith nen tnkibchigiidiadliakiblinins gaidiaspbauiaeiiaiais 19
Kerr-McGee Corp. v. Navajo Tribe of
Indians, 471 U.S. 195 (1985) ................ 4,13, 16
Montana v. Blackfeet Tribe of Indians, 471
a I sendeceuesie 27
Owasso Indep. Sch. Dist. No. 1-011 v.
Falvo, 534 U.S. 426 (2002).................0.0200 19
Peabody Coal Co. v. State, 761 P.2d 1094
ee ee eT es i sediwesronscs 3, 27
Quern v. Jordan, 440 U.S. 332 (1979).......... 19
Samish Indian Nation v. United States, 82
I i oisiis ccdcininnbstecaudadbintndeieseres 33
In re Sanford Fork & Tool Co., 160 U.S.
ER SaaS IPRS EI ee ae nO Sa 30
Seminole Nation v. United States, 316 U.S.
EEE RES SEE EA RRS EON oe Ne 26
Sprague v. Ticonic Natl Bank, 307 U.S.
| EER ee 19
Udall v. Tallman, 380 U.S. 1 (1965) ............ 28

United States v. Mason, 412 U.S. 391
SITU Gilicalskashniabpa:oictcsoohaibdiiaeaislbseebalial oidimsienmnadiaioniiah 22, 26

v

TABLE OF AUTHORITIES — continued

Page
United States v. Mitchell, 445 U.S. 535
fF Iai sikastcsniocinrsiehniediieiahathiciienaheieciiihiidaint Rind 1,18
United States v. Mitchell, 463 U.S. 206
(1983), affy, Mitchell v. United States,.
664 F.2d 265 (Ct. Cl. 1981)..................06. passim
United States v. Navajo Nation, 537 U.S
I a iscdirsanstheancichdledichacainaiy woieapdarvanttannel passim
United States v. New Mexico, 438 U.S. 696
I abet sascrchschhehtinsnlins sins dtlicintiitseidiiibtesedianie 8
United States v. Shoshone Indian Tribe,
BAG TFB. BE Ge isnt vitiintciccvccetsecsitecvccsiess 33
United States v. White Mountain Apache
Tribe, 537 U.S. 465 (2003) ....................... passim

Varity Corp. v. Howe, 516 U.S. 489 (1996)..23, 26

VMI v. United States, 508 U.S. 946 (1993)... 33

Wolfchild v. United States, 78 Fed. Cl. 472
(2007), appeal pending, No. 2008-5018

SPs SI a csecihcinaisnprissichaiihiibelidinatiteacenlgindiciaiidalamp tates 33
STATUTES AND REGULATIONS

Act of June 14, 1934, ch. 521, 48 Stat. 960 .. 3
Act of Oct. 9, 1980, Pub. L. No. 96-401, 94

RP MRED NTN eT TR 31
Tax Relief and Health Care Aci of 2006,

Pub. L. No. 109-432, 120 Stat. Ze22.......... 9, 31

DE CE ee cent cntsonitinninpainnicineminatins 10

SURE sis: itewtihssdnsadiianeoedidionenieoneks 4,31

Ucn nc csseceninceancdrabiiodmepeduinieasie 4

icin ieacetenpehipeitipiebinasaianiall 4, 27

REISE RESETS 4

EE RE! Rake A CD aL 6

SUIT iets’ du inisenpncsieiiiaaiies saihaaaiiaanale 5, 31

i aitithvinecnesaestsiassiniddisetciillaiadaeliiiiaie 5

vl

TABLE OF AUTHORITIES ~ continued

Page

Be are siiviedeecoreiccsessvesceaswsnosessnse 4, 22
SSE TREE ENCES 31
hac scr sapinniemanewnte 31
a ceenpenenebonnee 8
NE, GG no sccccccseusstnnssoee 7
in cc iccacodanoenoensonts 8, 9, 29

yee ge Ls 5 ee 10
BD Cr Bes Oh ee OR vicccvcscccccescccccescesss 6, 12, 24
IEE cine sccccsvcnvesessocers 6

Oy IED vecicccncssesccoscesesescosses 6

Oe IED «co cccnccecseccssotsonseess 6
cs ccencecsiceesocceesotess 6

| re 6
a ccccostesousis 6
cc esccteneenees 6
| a 6

30 C.F.R. § 206.250(d) (1989)................0.. 8
ee 10
SE IND P vccnecoscactuccocescosess 10
nn. cs cndenesoonsesses 10, 29

FR IED vnsccscescccccscosccceses 9, 10, 29

42 Fed. Reg. 63,394 (Dec. 16, 1977).............. 9
49 Fed. Reg. 37,336 (Sept. 21, 1984) ............ 7
38,462 (Sept. 28, 1984)............. 9,10

51 Fed. Reg. 4507 (Feb. 5, 1986)................... 7
8168 (Mar. 7, 1986).................. 6, 7

15,763 (Apr. 28, 1986).............. 7

52 Fed. Reg. 1840 (Jan. 15, 1987)................. 7
31,916 (Aug. 24, 1987) ............. 14

39,332 (Oct. 21, 1987) .............. 14

54 Fed. Reg. 1492 (Jan. 13, 1989)................. 7
22,182 (May 22, 1989).............. 31

61 Fed. Reg. 35,634 (July 8, 1996)................ 31

vil

TABLE OF AUTHORITIES -— continued

ADMINISTATIVE DECISIONS Page
First Mesa Consol. Vills. v. Phoenix Area
Dir., 26 IBLIA 18 (1994) 0.00.00... cee 28, 29
Hopi Tribe v. OSM, 109 IBLA 374 (1984).... 10
Peabody Coal Co., 53 IBLA 261 (1981)......... 6
Peabody Coal Co., 72 IBLA 337 (1988)......... 6
Peabody Coal Co., 155 IBLA 83 (2001)......... 6
LEGISLATIVE HISTORY
S. Rep. No. 81-550 (1949)...................cceeeeseees 4
ss. as cimsecdntcusnes 29
H.R. Rep. No. 81-963 (1949) ................ceeeeeee 5
TIED on. sccnsceccoscoverors 30
26 Cong. Rec. 7703 (1894) ............c..ccccseeceeeeee 4
TREATIES
Treaty With the Navajo, Sept. 9, 1849, 9
EIR SALAD Ov ord ea TD 3
Treaty With the Navajo, June 1, 1868, 15
a emits 4

SCHOLARLY AUTHORITIES

Cohen’s Handbook of Federal Indian Law
(Nell J. Newton ed., 2005) ..................0000ee 31
Brian E. McGee, Coal Royalty Valuation:
The Federal Perspective, 97 W. Va. L.
a essnienasaubeniins 7

OTHER AUTHORITIES

Proposed Constitution for Navajo Tribe, 2
Op. Sol. of Indian Affairs 1641 (1954)....... 5

Vill

TABLE OF AUTHORITIES ~ continued

Page
Vijai N. Rai, Office of Trust Responsi-
bilities, Report on the Issue of Royalty
Rate Adjustment (1985) ...................2.2000000 10

1
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|

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a) tg Oe ee | Pairs) ce & - tht ork re Sees ‘oo. @2 *@7s74) | ae Pe a ee ee ey ee

INTRODUCTION

The Government asks this Court to review an
interlocutory Federal] Circuit decision involving the
application of settled‘ legal principles to a specific
network of treaty, statutory and regulatory rights in
a unique factual setting. Under this Court’s
precedents, each Indian breach of trust case turns on
the provisions of the particular treaties, statutes and
regulations and the individual facts presented. See,
e.g., United States v. Mitchell, 445 U.S. 535 (1980)
(“Mitchell I”); United States v. Mitchell, 463 U.S. 206
(1983) (“Mitchell IT’). This case is no exception. The
Federal Circuit’s determination that the Government
breached compensable trust duties to the Navajo
Nation rests on a network of legal provisions specific
to the 1964 Navajo coal lease, whose operative
provisions are themselves unique.

The Government’s contention that the Court has
already resolved this case in its entirety in United
States v. Navajo Nation, 537 U.S. 488 (2003) (“Nava-
jo’) is wrong. This Court did not remand with in-
structions to dismiss in Navajo; it remanded for fur-
ther proceedings. The Court’s decision was expressly
cabined, commencing with the following statement:
“This case concerns the Indian Mineral Leasing Act of
1938... and the role it assigns to the Secretary of the
Interior . .. with respect to coal leases executed by an
Indian Tribe and a private lessee.” /d. at 493. The
holding was also similarly limited. Jd. Thus, in
Navajo, as in Mitchell I, this Court held that a
particular federal statute and its implementing regu-
lations did not create a money-mandating fiduciary
duty. Both decisions left open the question — answer-
ed affirmatively in the decision below and in Mitchell
II — whether other federal laws might do so.

2

The judgment below is faithful to this Court’s
precedents. In Mitchell IJ, this Court determined
that fiduciary duties in the management of property
held in an express trust arose due to the
Government’s pervasive supervision of virtually all
aspects of the Indian resource. The statutes and
regulations in Mitchell IJ.provided the “contours” of
the federal trust duty. See 463 U.S. at 224. To fill in
those contours, this Court looked to general trust law
standards in both Mitchell IJ and United States v.
White Mountain Apache Tribe, 537 U.S. 465 (2003)
(“Apache”). See Mitchell I, 463 U.S. at 225 n.29
(supporting fiduciary management duties where the
Government assumes control over property belonging
to Indians); Apache, 537 U.S. at 475 (relying on
“elementary trust law” to subject Government to
management duties to preserve the trust property
although the relevant statute did not “expressly
subject the Government to duties of management and
conservation”). Federal control over Navajo coal
during the relevant time period was at least as
pervasive as the control found sufficient to create
money-mandating trust duties with respect to the
timber resource in Mitchell IJ. And here, the
Government breached not only its basic management
duties of care, candor and loyalty, but also other
duties specifically prescribed by Congress for the
protection of Navajo economic interests.

The interlocutory decision in this case is of no
importance in future Indian trust disputes. Two of
the principal statutes, the Rehabilitation Act and the
Indian Lands section of the Surface Mining Control
and Reclamation Act of 1977 (““SMCRA”), apply as a
practical matter to only three Indian tribes, the
Navajo, Hopi and Crow. Key regulations, including
the one requiring the Secretary to include non-

3

environmental terms requested by the tribes in coal
lease amendments, are no longer in effect. In 2006,
Congress provided an avenue for the tribes to assume
the comprehensive control over the entire process of
coal surface mining which had been controlled
exclusively by the Department from 1984-1987.

At bottom, the Government is arguing that the
court below misapplied correctly stated legal
principles in an interlocutory decision of no recurring
importance. Accordingly, this case does not merit the
Court’s attention. If this were a petition filed by a
private litigant, it would surely be denied. The
United States’ disappointment that the Court's
earlier ruling did not terminate the Navajo’s claim
provides no warrant for further review.

COUNTER-STATEMENT OF THE CASE
1. Statutory And Regulatory Frame-work.

Navajo coal is held under an express statutory
trust. As detailed below, federal statutes and
regulations govern Navajo coal “from the creation of
its leases to the reclamation of land.” Peabody Coal
Co. v. State, 761 P.2d 1094, 1099 (Ariz. Ct. App.
1988).

The federal-Navajo relationship is founded on two
treaties, ratified in 1849 and 1868. In the first, the
Navajo recognized the federal government’s “sole and
exclusive - right .of regulating the trade and
intercourse with the said Navajoes”; in return the
United States agreed to “so legislate and act as to
secure the permanent prosperity and happiness of
said Indians.” Treaty with the Navajo, arts. 3, 11,
Sept. 9, 1849, 9 Stat. 974, 974-75. The coal land at
issue was formally included in the Navajo
Reservation under the Act of June 14, 1934, ch. 521,

4

48 Stat. 960. In 1974, Congress confirmed that the
“lands described in the Act of June 14, 1934... shall
be held in trust by the United States exclusively for
the Navajo Tribe.” 25 U.S.C. § 640d-9(a).

The Indian Mineral Leasing Act (“IMLA”) was
passed in 1938. Its “basic purpose” is “to maximize
tribal revenues from reservation lands.” Kerr-McGee
Corp. v. Navajo Tribe of Indians, 471 U.S. 195, 200
(1985). Like the timber statute in Mitchell HW, IMLA
permits the Indians to convey their resources with
Secretarial approval. See 25 U.S.C. §§ 396a, 406(a).
However, IMLA proved inadequate to meet the needs
of the Navajo.

Appalling conditions on the Navajo Reservation
prompted Congress to pass the Navajo and Hopi
Rehabilitation Act of 1950, 25 U.S.C. §§ 631-638.!
That Act “further|s} the purposes of existing treaties
with the Navajo Indians,” so that the Navajo will
“ultimately attain standards of living comparable
with those enjoyed by other citizens.” Id. § 631. The
Rehabilitation Act prescribed a federal development
program for Navajo resources directing the
“Secretary of the Interior... to undertake... a
program of basic improvements for thc...
development of the resources of the Navajo.” Id. The
coal lease at issue was approved as the “centerpiece
of the resources development program under the
Navajo and Hopi Rehabilitation Act.” C.A. App.
A3575 (Udall testimony).

' For example, the United States had failed to fulfill its treaty
obligation to provide schools for the Navajo. See Treaty with the
Navajo, art. 6, June 1, 1868 15 Stat. 667, 669; 26 Cong. Rec.
7703 (1894). In 1948, 80% of Navajos were illiterate, living in
“abject poverty.” E.g.,S. Rep. No. 81-550, at 5, 7 (1949).

5

The Rehabilitation Act included a section “to give
the Indians a greater voice in the administration of
the long-range program.” H.R. Rep. No. 81-963, at 2
(1949). That section requires the Secretary to keep
the Navajo Tribal Council informed of plans
pertaining to the development program and to “follow
fits} recommendations whenever he deems them
feasible and consistent with the |Act’s] objectives.” 25
U.S.C. §638. The Act offered the Navajo the
opportunity to adopt a constitution which “shall
authorize the fullest possible participation of the
Navajos in the administration of their affairs as
approved by the Secretary,” id. § 636, but the
Secretary rejected the constitution adopted by the
Navajo, in part because it would have given the Tribe
control over its mineral leasing. Proposed Consti-
tution for Navajo Tribe, 2 Op. Sol. of Dep’t of Interior
1641, 1642 (1954).

The Rehabilitation Act has specific provisions
concerning federal liability for improvident
conveyances of tribal resources. The Act permits the
Navajo Nation to convey its fee simple land, stating
that “such disposition siiall create no liability on the
part of the United States.” 25 U.S.C. § 635(b). The
Secretary is also authorized to transfer tribal trust
lands to municipal or tribal corporations organized
under state law, “and thereafter the United States
shall have no responsibility or liability for... the
management, use, or disposition of such lands.” 7d.
§ 635(c). Tellingly, another subsection of the Act
requires the Secretary to approve tribal leasing of
“natural resources”; that subsection, in contrast to
the others, does not exempt the United States from
liability in connection with such transactions. See id.
§ 635(a).

6

The Rehabilitation Act contains the additional!
requirement that the federal development program
be “administered in accordance with the provisions of
this subchapter and existing laws relating to Indian
affairs,” id. § 632, including regulations implement-
ing other Indian mineral leasing laws. Those
regulations impose Secretarial control over mineral
lease negotiations, 25 C.F.R. § 211.2 (1987); the size,
shape and duration of leases, id. §§ 211.8-.10; and the
terms of any negotiated jiease, id. § 211.30. The
Department controls coal-resource planning under
the Rehabilitation Act, App. 27a, and regulates coal
exploration under 25 C.F.R. Part 216 Subpart A
(1987), see 25 C.F.R. §§ 216.2(a), 216.6 (1987). These
regulations also require approval of any surface
mining plans by the United States Geological Survey,
include detailed reporting requirements to USGS,
and permit USGS to enter the land and cancel leases
for noncompliance with the plans. Jd. §§ 216.7, 216.9,
216.10, 216.12.

The Government has at all relevant times
supervised and controlled all aspects of Navajo coal
royalty setting, reporting, payments, accounting, and
auditing. See Peabody Coal Co., 53 IBLA 261 (1981);
Peabody Coal Co., 72 IBLA 337 (1983); Peabody Coal
Co., 155 IBLA 83, 94-95 & n.12 (2001) (concerning
1984 royalty adjustment). After the Commission of
Fiscal Accountability of the Nation’s Energy
Resources informed Congress in 1982 that the
Government's mineral royalty management system
had severe failings and that “the general problems of
verifying production... and designing an effective
audit program are common to all minerals,” see 51
Fed. Reg. 8168, 8168 (Mar. 7. 1986) (omission in
original) (quoting Commission’s Report), Congress
required in the Federal Oil and Gas Royalty

7

Management Act of 1982 (“FOGRMA”) that the
Secretary report back on “the adequacy of royalty
management for coal... on... Indian lands....
[with] proposed legislation if the Secretary
determines that such legislation is necessary.”

FOGRMA § 303, 30 U.S.C. § 1752, hist. notes.

The Secretary reported that new legislation was
unnecessary because MMS already had adequate
authority. See 51 Fed. Reg. 15,763, 15,764 (Apr. 28,
1986). MMS then implemented the FOGRMA
directive for Indian coal by establishing the Auditing
and Financial System in 1984, see 49 Fed. Reg.
37,336 (Sept. 21, 1984) (promulgating 30 C.F.R. pts.
212 and 218), and the Production Auditing and
Accounting System in 1986, see 51 Fed. Reg. 8168
(promulgating 30 C.F.R. pt. 216). In doing so, the
Department “FOGRMA-tize[d] the coal industry” —
i.e:, treated coal the same as oil and gas regarding
royalty collection and management. Brian E. McGee,
Coal Royalty Valuation: The Federal Perspective, 97
W.Va. L. Rev. 887, 926 (1995) (emphasis omitted);
C.A. App. 3435.

Rules proposed in 1986 and finalized in 1989 for
calculating Indian mineral royalties reflect additional
federal control over Navajo coal royalties during the
relevant time period. See 51 Fed. Reg. 4507 (Feb. 5,
1986) (proposing rules); 54 Fed. Reg. 1492 (Jan. 13,
1989) (finalizing rules). These rules “largely
continue{d] past practice for coal valuation,” 54 Fed.
Reg. at 1493- that is, to seek the “long-term
maximum rate of return for... Indian leases,” 52
Fed. Reg. 1840, 1841 (Jan. 15, 1987), and “to ensure
that the trust responsibilities of the United States

8

with respect to the administration of Indian coal
leases are discharged,” 30 C.F.R. § 206.250(d) (1989).?

The Secretary reserved exclusive authority to
adjust the royalty rate under Article VI of the
Rehabilitation Act lease. C.A. App. 284. The IMLA
form lease had no such provision. See id. at 3648-52.
After Congress raised the minimum royalty rate for
federal surface-mined coal to 12%% in 1976,3 30
U.S.C. § 207(a), Secretary Andrus established 12%%
as the “absolute minimum” rate for Indian leases,
rejecting a lease negotiated by the Navajo for failing
to achieve that minimum. C.A. App. 334.

Additional federal contro! of Navajo coal was added
in 1977 in the Indian Lands Section of SMCRA, 30
U.S.C. § 1300. App. 27a-28a. There, the United
States confirmed its control over lease terms, see 30
U.S.C. §1300(c), (d) (unilaterally modifying all
Indian coal leases to incorporate environmental
terms and conditions), and required the Setretary to
enforce in leases after 1977 other terms and
conditions requested by the tribes, id. § 1300(e). That
provision was added to assist Indian tribes in their
negotiations. App. 39a (citing 123 Cong. Rec. S.
15,575 (1977)). Thus, the relevant rule required that
non-environmental terms requested by tribes be

2 These “past practices” are also reflected in the Department's
Manual and its Coal Leasing Policy on Indian Lands during the
relevant period. See C.A. App. 238 (130 DM 1.3E (1987)), 244-46
(54 BIAM O, § 604.05 (1984)), 332, 1862-63 (Coal Leasing
Policy). These policies elucidate the agency’s view of its
statutory responsibilities. See United States v. New Mexico, 438
U.S. 696, 703 n.7 (1978).

3The 12%% rate was not the “standard” federal rate at this
time, cf. Pet. 7; the Department routinely demanded a greater
royalty for its more valuable reserves, C.A. App. 3673, 4224.

9

incorporated in coal leases. 30 C.F.R. § 750.20(b)
(1987).4

Congress intended that the tribes would ultimately
assume full regulatory authority over surface coal
mines on Indian lands, 30 U.S.C. § 1300(a), but that
authority was not granted until 2006. Tax Relief and
Health Care Act of 2006, Pub. L. No. 109-432, § 209,
120 Stat. 2922, 3109 (to be codified at 30 U.S.C.
§ 1300()). During the relevant time period, the tribes
had no authority to regulate surface coal mining
because, under SMCRA, “[t}he Federal-Indian trust
responsibilities for land use decisions... on Indian
lands remainfed] with BIA.” 49 Fed. Reg. 38,462,
38,469 (Sept. 28, 1984) (promulgating Indian Lands
rules).

Under SMCRA regulations promulgated in 1977
and 1984, the Secretary controlled all aspects of
Navajo coal exploration, leasing, operations, and
reclamation. See 42 Fed. Reg. 63,394 (Dec. 16, 1977)
(promulgating 25 C.F.R. pt. 177, redesignated as 25
C.F.R. pt. 216, subpt. B (1987)), 49 Fed. Reg. 38,462
(amending 30 C.F.R. pts. 700, 701, and 710 and
promulgating 30 C.F.R. pts. 750 and 755). The
regulations establish the federal Office of Surface
Mining Reclamation and Enforcement (“OSM”) as
“the regulatory authority on Indian lands” with broad
administrative and enforcement powers; the federal
Bureau of Land Management as. the agency
responsible for approving and enforcing exploration
and mining plans on Indian lands and verifying
royalty calculations; the federal Mineral Manage-
ment Service (“MMS”) as the agency responsible for
royalty collection, audit, and accounting; and the BIA

4The Government relies on a later rule. Pet. 30. But see
Navajo, 537 U.S. at 511 n.15.

10

as the agency charged with consulting with tribes on
matters related to this comprehensive federal
administrative scheme. 30 C.F.R. § 750.6 (1987).
The regulations unilaterally amend Indian coal
leases to include SMCRA environmental require-
ments. Id. § 750.20(a) (1987). These regulations
were intended to satisfy “the trust responsibilities the
Department has to tribes regarding lands subject to
regulation.” 49 Fed. Reg. at 38,462.

Finally, SMCRA and the general Indian Right-of-
Way Act confer federal control over rights-of-way
central to coal development on the Navajo
Reservation. See 25 U.S.C. §§ 323-328; 25 C.F.R. pt.
169 (1987); 30 C.F.R. §§ 700.5, 700.11(a) (1987); Hopi
Tribe v. OSM, 109 IBLA 374 (1984) (concerning
Peabody haul road); C.A. App. 3640-47 (concerning
Peabody access road). This Court considered such
control in finding federal fiduciary obligations to
manage Indian lands and resources in Mitchell I,
463 U.S. at 223-26 & nn.29, 31.

In sum, “[v]irtually every stage of the process is
under federal control” and the relevant statutes and
regulations therefore “give the Federal Government
full responsibility to manage Indian resources and
land for the benefit of the Indians.” Jd. at 222, 224.

2. Factual Background.

The relevant facts are sordid and undisputed. See
App. 123a-132a, 89a-90a, 98a-99a, 3a-7a. They are
summarized only briefly.

The coal at issue, leased to Peabody in 1964, is
“exceptionally valuable.” Vijai N. Rai, Ph.D., Office of
Trust Responsibilities, Report on the Issue of Royalty
Rate Adjustment 5, 8 (1985), C.A. App. 710, 713. As
noted, the lease was drafted and approved by the
Department as the “centerpiece” of the federal

11

resource development plan _ prescribed by the
Rehabilitation Act, under personal supervision of the
Secretary of the Interior, Stewart Udall. C.A. App.
3575 (Udall declaration), 4262 (declaration of
Peabody counsel).

The lease provided an “extremely low royalty rate,”
App. 123a, “substantially lower... than the 12%
percent of gross proceeds rate Congress established in
1977 as the minimum permissible royalty for coal
mined on federal lands.” Navajo, 537 U.S. at 496.
But the lease permitted the Secretary, unilaterally, to
adjust the royalty rate in 1984. Id. at 495. In June of
that year, a BIA Area Director, under delegated
authority, implemented Article VI and raised the
royalty rate to 20% which reflected the value of the
coal. Id. at 496; App. 125a-126a; C.A. App. 406-36.
Peabody and its two customers appealed. Navajo,
537 U.S. at 496. After receiving the briefs and
reports of the parties, Acting Assistant Secretary
John Fritz, the appellate decision maker, commis-
sioned additional federal studies, all of which
confirmed the propriety and fairness of the 20% rate.
C.A. App. 610-15, 649-714. Fritz invited Peabody to
supplement the record with additional cost, revenue,
and investment data to substantiate its claim that
the 20% rate was unreasonable. Navajo, 537 U.S. at
496; C.A. App. 616. Peabody declined to do so, C.A.
App. 626.

In June 1985, “the decision document affirming the
Area Director's decision awaited Mr. Fritz’
signature.” App. 127a; Navajo, 537 U.S. at 496.
However, before Fritz could return from military
reserve duty to sign the decision, the Solicitor’s Office
leaked the decision to Peabody. C.A. App. 725, 1089-
90. Peabody hired Stanley Hulett, Interior Secretary
Hodel’s close personal friend, to influence Hode!l ex

12

parte. Hulett met secretly with Hodel, and Hodel
agreed to sign a memorandum, prepared by Peabody’s
attorneys in the appeal, instructing Fritz not to raise
the royalty rate. App. 127a-128a; C.A. App. 746. The
Navajo Nation was not notified of this meeting or the
Secretary’s instruction. App. 128a.

Rather, the Solicitor’s Office originally warned that,
if the Navajo learned of the Secretary’s action, it
would likely transfer the case to the IBIA, and the
Secretary “would have to personally assume juris-
diction of the appeal to avoid a decision by the IBIA.”
C.A. App. 771. Thus, after meetings with Hodel, the
Solicitor’s Office intentionally misled the Navajo
Nation in an August 1985 letter. App. 128a. The
Associate Solicitor who signed that letter admitted
that it was not candid, C.A. App. 1789, and the
letter’s drafter acknowledged that it was calculated to
conceal the truth, id. at 1451-52. The Navajo Nation
construed this letter and other odd communications
from the Department® as a signal that the merits of
the 20% rate were still being debated within the
Department. /d. at 2854.

The applicable regulation permitted negotiations
only if requested by the tribes and limited them
generally to 30 days. See 25 C.F.R. § 211.2 (1987);
C.A. App. 2048-49 (PPFs 262-264).6 The Navajo
Nation informed the Secretary that it opposed further
negotiations. E.g., C.A. App. 751, 766-67. Nonethe-
less, the Secretary sent the Nation back into negoti-
ations, furthering the company’s “maximum delay”
strategy. See id. at 452. The Navajo Nation
negotiated “unarmed with critical knowledge,” App.

5 See Pet. 7 n.2.

6 The Plaintiffs Proposed Findings (“PPFs”) cited in this
Opposition are all unrefuted.

13

138a, and “facing severe economic pressures,” id. at
90a, C.A. App. 4214-19. “[T]he Navajo Nation, argu-
ably already at a competitive disadvantage, could not
truly be said to have negotiated from a position of
equality with Peabody.” App. 138a-139a.

The Navajo endured two more years of negligible
royalties and finally capitulated. The facial 124%
royalty rate in the resulting 1987 lease amendments
was “well below the rate that had previously been
determined appropriate” by the Department. App.
137a-138a. To obtain even that rate, “(t]he Navajo
Nation forfeited $33 million in back taxes and $56
million in back royalties,” id. at 13la, and was forced
to limit taxes upheld in Kerr-McGee Corp. v. Navajo
Tribe of Indians, 471 U.S. 195 (1985). Despite the
Court of Federal Claims’ (“CFC”) statement to the
contrary, App. 155a, the Navajo Nation had urged
repeatedly and demonstrated that the true royalty
rate was less than the minimum that Congress had
established for federal coal.’? All major features of the
amended leases damaged Navajo interests.®

7 See C.A. App. 107, 124, 133, 1973 (Mot. for Summ. J. (Dec.
15, 1997)); id. at 2046, 2058 (PPFs 247, 315); id. at 2771, 2796
(Consolidated Response (June 17, 1998)). The Nation’s Rule 59
motion requested the CFC to correct its misstatement, id. at
3382-83, but the CFC did not address the matter either then or
in response to the Nation’s renewed request and further
showing on remand, id. at 3568, 3673-74; see also id. at 3666
(coal conveyed “at substantially less than the Fair Market
Value”).

8 The Government touts the increase in royalty rate to 12%%
for coal under another lease, Pet. 7, but all observers knew that
if the 20% rate were affirmed for the Navajo lease, the rate for
the adjacent Navajo and Hopi coal would also rise to 20%. E.g.,
C.A. App. 740, 1072-73, 1522-23. The bonuses highlighted by
the Government, Pet. 7, were “considerably below” bonuses that
the United States demands for its own coal. C.A. App. 3673-74,

a‘

The lease amendments were, in essence, new
leases, bearing no resemblance to the IMLA form
lease. App. 42a; compare C.A. App. 793-835 (1987
lease), with id. at 3648-52 (form lease). In September
1987, both the Nation and the BIA Area Office
requested that the Department review them to
determine if they were in the Nation’s best interest.
Id. at 836-37. Review was requested under regula-
tions that required economic analyses of lease
amendments, essential to “ensure that Indian owners
desiring to have their minerals developed receive at
least fair and reasonable renumeration.” See 52 Fed.
Reg. 31,916, 31,918, 31,930 (promulgating 25 C.F.R.
§ 211.1(a)), 31,921-22 and 31,933 (promulgating 25
C.F.R. § 211.34) (Aug. 24, 1987). Such review would
have shown that the leases were unfair to the Navajo,
see, e.g., C.A. App. 2051-56 (PPFs 279, 281-302), and
the Department suspended the rules’ effective date
shortly after the Nation’s and BIA’s requests, at the
behest of “industry” and under the guidance of the
Assistant Solicitor who “shepherded” the lease
amendments through the Department for Peabody,
52 Fed. Reg. 39,332 (Oct. 21, 1987); C.A. App. 920,
2047 (PPF 254). Six weeks later, Hodel assured
Peabody that he would approve the amendments,
without a recommendation from any Interior
employee. C.A. App. 2056-57 (PPFs 304-306). The
merits of the transaction to the Navajo were

irrelevant to the Department. Jd. at 2047, 2051

(PPFs 252-253, 277-278).

Hodel’s actions benefitted one of Peabody’s
customers, the Navajo Generating Station (“NGS”), in
the amount of $347,500,000. C.A. App. 736. Because

1857. Peabody’s agreement in 1987 not to contest tribal taxes
was insignificant because this Court had validated them in
Kerr-McGee.

15

the Bureau of Reclamation owns a 24.5% interest in
NGS, Hodel’s actions directly benefited the Govern-
ment in an amount in excess of $84 million. App.
159a-160a; C.A. App. 1860.

These unrebutted facts show that the Department
violated the most basic trust duties of care, loyalty,
and candor and that there is “no plausible defense”
for the Department’s actions here. App. 136a, 139a.
“The facts of this case show that the Secretary acted
in the best interests of a third party and not in the
interests of the beneficiary to whom he owed a
fiduciary duty — a classic violation of common law
fiduciary obligations.” Jd. at 162a.

3. Prior Proceedings.

The Navajo Nation sued the United States, alleging
a breach of trust in its mismanagement of Navajo
coal controlled by the United States under a
comprehensive federal statutory and _ regulatory
scheme, including IMLA, the Rehabilitation Act,
SMCRA, FOGRMA, and associated regulations. C.A.
App. 32-42. The CFC unequivocally found that the
United States had breached its duties of care, candor
and loyalty. E£E.g., App. 135a-139a, 162a. In its
analysis, the CFC focused on only one of the cited
statutes, IMLA. Jd. at 139a-140a (“In order to
succeed in litigation in this Court, the plaintiffs must
show that IMLA imposes specific fiduciary duties on
the government... .”); see id. at 14la-155a. The
CFC held that the United States did not violate any
duty mandating compensation under IMLA.

On appeal, the Navajo Nation continued to rely on
its network of statutes and regulations, but the
Federal Circuit determined that IMLA, by itself,
established money-mandating duties that were

=

16

violated.? App. 95a-98a; see id. at 72a. IMLA applies
to all tribes and all mineral-leasing activities. This
Court thus granted certiorari to address the scope of
IMLA, and it reversed. It held “that the Tribe’s
claim... fails, for it does not derive from any
liability-imposing provision of the IMLA or its
implementing regulations,” and “remanded for
further proceedings consistent with [its] opinion.”
Navajo, 537 U.S. at 493, 514.

On remand, the court of appeals found that this
Court’s decision held only that [MLA did not give rise
to money-mandating duties and_ rejected’ the
Government’s contention that the remand should be
treated as an order of dismissal with prejudice. App.
80a-8la. The court remanded to the CFC to decide
“whether, apart from IMLA, section 399, and IMDA,”
id. at 8la, see supra n.9, “a network of other statutes
and regulations’ imposes ‘judicially enforceable
fiduciary duties upon the United States’ in connection
with the Peabody lease and, if so, whether such
duties were breached.” App. 8la. The Federal
Circuit denied the United States’ petition for
rehearing and rehearing en banc and the United
States did not seek review by this Court.

On remand, the CFC took additional evidence,
including the unrebutted affidavit of Secretary Udall
and the reports of economists showing that the
Navajo Nation obtained less compensation for its coal
in bonuses and royalties than the federal government
requires for its own coal. C.A. App. 3575, 3661-12.

® The court of appeals also found support for its holding in the
1982 Indian Mineral Development Act (““IMDA”) and 25 U.S.C.
§ 399. App. 89a, 95a-98a. The Nation had never relied on § 399,
and had cited to [MDA only to contrast its focus on tribal self-
determination with IMLA’s “basic purpose - to maximize
revenues from reservation lands.” Kerr-McGee, 471 U.S. at 200.

17

Nonetheless, the CFC held that federal law did “not
suffice to establish a money-mandating trust in the
area of royalty rates” and again dismissed. App. 69a.
The court of appeals reversed, holding on the basis of
the array of statutes and regulatory provisions
described supra, that the Government breached its
management duties arising from its comprehensive
control over all aspects of Navajo coal leasing and
development, and violated specific duties set forth in
the Rehabilitation Act and SMCRA. Jd. at 32a-43a.
The Government’s petition for rehearing and
rehearing en banc was denied without dissent.

REASONS FOR DENYING THE PETITION

I. THE DECISION BELOW IS WHOLLY CON-
SISTENT WITH NAVAJO’S REMAND.

The court of appeals carefully considered and
rejected the Government's contention that Navajo’s
remand for further proceedings precluded further
proceedings to consider statutes and regulations not
at issue in Navajo. App. 2a; id. at 78a-8la. That
determination is clearly correct.

As formulated by the Government, the Question
Presented in this Court’s Navajo decision was limited
to the scope of the United States’ duties under IMLA:

Whether the court of appeals properly held
that the United States is liable to the Navajo
Nation for up to $600 million in damages for
breach of fiduciary duty in connection with the
Secretary's actions concerning an Indian mineral
lease, without finding that the Secretary had
violated any specific statutory or regulatory duty
established pursuant to the IMLA. [Petition at i,
United States v. Navajo Nation, No. 01-1375
(filed Mar. 15, 2002) (Emphasis added).]

ke

18

The Government’s decision to craft a limited Question
Presented is understandable, because the court of
appeals’ decision had not addressed any of the other
statutes comprising the Navajo Nation’s network. As
the Government notes, the Nation relied on other
statutes and regulations in its briefs, but this Court
adhered to its customary practice and addressed only
the Question Presented.

The text of the decision removes any doubt. Navajo
stated first that “[t]his case concerns the Indian
Minerai Leasing Act of 1938 (IMLA)... and the role
it assigns to the Secretary of the Interior... with
respect to coal leases executed by an Indian Tribe and
a private lessee.” 537 U.S. at 493. To answer that
question, this Court “consider[ed] whether the IMLA
and its implementing regulations can fairly be
interpreted as mandating compensation for the
Government’s alleged breach of trust in this case.”
Id. at 506; see id. at 507 n.11 (“We rule only on the
Government’s role in the coal leasing process under
the IMLA.”). This Court reasoned that “the
Secretary’s involvement in coal leasing under the
IMLA more closely resembles the role provided for
the Government by the GAA [General Allotment Act]
regarding allotted forest lands” in Mitchell I, 445 U.S.
535, Navajo, 537 U.S. at 508, and similarly rejected
liability for the Secretary’s ex parte contacts with
Peabody because “[njothing in... IMLA’s basic
provision, or in the IMLA’s implementing regulations
proscribed” them, 537 U.S. at 513.

The Court’s holding is likewise restricted to the
IMLA question presented by the Government: “we
hold that the Tribe’s claim for compensation from the
Federal Government fails, for it does not derive from
any liability-imposing provision of the IMLA or its

19

implementing regulations.” Jd. at 493. Finally, this
Court remanded for further proceedings. /d. at 514.

The Govermment’s argument that the remand for
further proceedings actually foreclosed them contra-
dicts basic principles of this Court’s jurisprudence.
First, this Court does “not decide issues outside the
questions presented by the petition for certiorari.”
Glover v. United States, 531 U.S. 198, 205 (2001).
Moreover, this Court “decide[s] cases on the grounds
raised and considered in the Court of Appeals.”
Owasso Indep. Sch. Dist. No. 1-011 v. Falvo, 534 U.S.
426, 431 (2002). Here, neither the Question
Presented nor the prior decision of the Federal
Circuit adverted to the other statutes and regulations
upon which the Navajo Nation has always based its
claim. Thus, Navajo’s “remand[}... ‘for further
proceedings” gave the lower courts full discretion to
consider and decide any matters left open by the
mandate. Quern v. Jordan, 440 U.S. 332, 347 n.18
(1979). The Government’s contrary argument is
based on a single phrase in Navajo “we have no
warrant from any relevant statute or regulation” upon
which to base enforceable duties. Pet. 19. That
phrase must be read in light of the appellate decision
under review (discussing only IMLA, § 399, and
IMDA) and the issue before the Court — ie., “the
Indian Mineral Leasing Act of 1938... and the role it
assigns to the Secretary.” Navajo 537 U.S. at 493;
see Sprague v. Ticonic Nat'l Bank, 307 U.S. 161, 168
(1939). The Government's argument ignores not only
the relevant context and limited Question Presented,
but also the Court’s express language confining the
issue, the analysis, and the holding to the
Government’s duties under IMLA.

This Court knows how to remand with instructions
that result in dismissal. It “remand{s] with instruc-

20

tions to dismiss, with prejudice.” See City of
Cuyahoga Falls v. Buckeye Cmty. Hope Found., 538
U.S. 188, 199-200 (2003); Deakins v. Monaghan, 484
U.S. 193, 204 (1988). Navajo did not take this course.
Rather, this case has followed precisely the same
course as that in Mitchell I and Mitchell II, with the
courts first concluding that a particular statute — in
Mitchell I, the General Allotment Act, and in Navajo,
IMLA -— did not create money-mandating trust duties,
but thereafter recognizing that an additional network
of federal laws did. Nothing in Navajo precluded the
Federal Circuit from following this path.

Il. THE DECISION BELOW FAITHFULLY
APPLIES GOVERNING PRECEDENT.

The Government next argues that the analysis in
the decision below is inconsistent with Navajo and
the Mitchell cases in two respects. First, the
Government contends that the Federal Circuit did
not require the Navajo to “allege a violation of a
specific rights-creating or duty-imposing statute or
regulation,” and instead authorized money damages
solely for a violation of “common-law trust duties.”
Pet. 22. Second, the Government claims that the
court’s conclusion that federal laws impose money-
mandating obligations on the United States is wrong.
Id. at 28. The first argument misunderstands the
decision below, which correctly states and faithfully
follows this Court’s precedent. The second argument
is that the Federal Circuit misapplied the governing
legal standard. It is both wrong and plainly not
worthy of this Court’s review.

1. The Government's first argument is based on a
mischaracterization of the decision below. The court
of appeals set out this Courts pathmarking
precedents in great detail and accurately recited the
legal framework for determining whether federal law

21

mandates a right of recovery in damages. App. 10a-
15a. The court recognized that “[t]here must be
‘specific rights-creating or duty-imposing statutory or
regulatory prescriptions.” Jd. at 24a, 37a.

In arguing that the court ignored this requirement
and instead authorized damages based solely on
violations of common-law trust duties, Pet. 23, the
Government focuses on the part of the Federal
Circuit’s opinion addressing the relationship between
statutory and regulatory prescriptions and the
common law of trusts. See App. 37a-38a. Review of
the opinion, however, reveals an accurate description
of the relevant roles of each set of legal rules in
determining the Government’s liability for damages.

Specifically, the court properly understood Apache
to permit the general trust law to be used to infer a
remedy in damages for breach of fiduciary duty. App.
37a (quoting Apache, 537 U.S. at 477); accord
Mitchell II, 463 U.S. at 226. The Government
concedes this point. Pet. 25-26. But the Government
insists that the only duties that the Government
must perform in the Indian trust context are those
expressly set forth in a statute or regulation. As the
Federal Circuit correctly held, this Court rejected
that argument in Apache.

In Apache, the relevant statute failed to “expressly
subject the Government to duties of management and
conservation.” 537 U.S. at 475. Nonetheless, this
Court decided that

the fact that the property occupied by the United
States is expressly subject to a trust supports a
fair inference that an obligation to preserve the
property improvements was incumbent on the
United States as trustee. This is so because
elementary trust law, after all, confirms the

22

commonsense assumption that a _ fiduciary
actually administering trust property may not
allow it to fall into ruin on his watch. [Id.
(emphasis added).]

The Court cited the Bogert trust treatise, the
Restatement (Second) of Trusts, and United States v.
Mason, 412 U.S. 391 (1973), for the proposition that
the federal trustee must administer trust assets it
controls with care and skill, even though that duty is
not set forth in any statute or regulation. 537 U.S. at
475.

The Government also misreads Mitchell IJ. Here,
as in Mitchell II, the property is held in an express
trust established by Congress, 25 U.S.C. § 640d-9(a),
and the trust has all of the hallmarks of a
conventional fiduciary relationship, see Mitchell I,
463 U.S. at 225; Apache, 537 U.S. at 473. Here, too,
the Department exercised literally daily supervision
over all aspects of the trust resource and virtually
every stage of the process was under federal control,
including royalty rates.!° Mitchell II, 463 U.S. at 222;
App. 16a, 27a-34a. In this setting, the relevant
statutes and regulations “establish fiduciary obliga-
tions of the Government in the management and
operation of Indian lands and resources.” Mitchell I,
463 U.S. at 226; accord Apache, 537 U.S. at 475. The
statutes and regulations establish the “contours” of
those management duties. Mitchell II, 463 U.S. at
224.

‘©The court of appeals properly rejected the Government’s
position that it could exert plenary control over the
determination of the increased royalty rate and then disclaim
liability for exercising such control. App. 15a-16a; see Mitchell
IT, 463 U.S. at 225.

23

The Government incorrectly asserts that Mitchell IT
found liability based only on violations of “a specific
duty separately set forth in one of the statutes or
regulations governing federal Indian timber manage-
ment.” Pet. 25. Not so. No statute or regulation
expressly required the Government to seek fair value
for Indian timber or establish a road system to permit
profitable exploitation or obtain more than the
minimum rate of return on monies collected and
invested by the United States. However, after
considering the purposes of the comprehensive
statutory scheme and the Government’s control over
rights-of-way and proceeds from timber sales, this
Court affirmed liability for the Government’s failure
to undertake these acts. See Mitchell lI, 463 U.S. at
228, affg Mitchell v. United States, 664 F.2d 265, 267,
273 (Ct. Cl. 1981).

Further, Apache eliminates any doubt as _ to
whether violations of general trust law standards
may be compensable even if the operative statute and
regulations do not expressly delineate the acts
required to fulfill the trust duties. See also Varity
Corp. v. Howe, 516 U.S. 489, 504 (1996) (“If the
fiduciary duty apphed to nothing more than activities
already controlled by other specific legal duties, it
would serve no purpose.”).

The Federal Circuit’s discussion of Apache reveals
its full understanding of the relationship between
specific rights-creating and duty-imposing language
and common law principles. It did not rely on
government duties “in other areas” to “impose[ |] new
and additional duties” on the Government. Pet. 26
(emphasis omitted). It relied, in part, on common-law
trust standards to measure the Government's
performance of its management duties under compre-
hensive statutes and regulations that govern every

24

aspect of coal development and leasing on Navajo
trust land.

The key distinction between Mitchell I and Mitchell
II (and, indeed, Navajo and Mitchell IJ), is that the
former involved only a “bare” or “limited” trust with
no federal responsibility to manage the trust
resource, while the latter involved “statutes and
regulations specifically addressing the management
of [the trust resource] on allotted lands.” See Apache,
537 U.S. at 473-74. As Mitchell II requires, the
Federal Circuit assessed the degree of authorized or
mandated federal control over Navajo coal lands,
including their leasing and _ exploitation, and
concluded that the Government exercised compre-
hensive control over all aspects of that resource. App.
24a-34a. Specifically, the court observed that the
Government planned the Navajo’s coal development
from the outset under the Rehabilitation Act, id. at
27a; approved the original lease which established
both the royalty rate andthe exclusive means by
which it would be adjusted, see id. at 3a-6a; C.A. App.
4262; controlled the royalty adjustment process and
negotiation by contract, regulation and in reality, see
App. 3a-4a, 32a-33a; 25 C.F.R. § 211.2 (1987); C.A.
App. 284; controlled coal mining operations, App.
27a-29a; controlled collection and management of
royalties, id. at 29a-31a; and controlled the content of
the Navajo’s coal leases, id. at 3la-33a. The Federal
Circuit also found that the Government “exercise[d]
actual control over the terms and conditions of coal
mining leases, including those already in existence,”
rejecting the Government’s contention that there can

25

be no liability here in the absence of specific control
over coal leasing. Id. at 33a.!!

In addition, the court below properly relied on the
Rehabilitation Act as providing a “fair inference” of
liability for the Secretary’s approval of leases of
Navajo minerals. App. 33a-34a; see Apache, 537 U.S.
at 472-73. As the court pointed out, while Congress
expressly exempted the Government from liability for
certain Navajo transactions in subsections (b) and (c)
of § 635, subsection (a) contains no such exemption,
giving rise to a fair inference that the Government is
hable for wrongful approval of such leases. App. 33a-
34a.

The Government’s pervasive control is intended to
benefit the Navajo. App. 34a-36a. As in Mitchell Ll,
the comprehensive control embodied in the relevant
statutes and regulations can “fairly be interpreted as
mandating compensation by the Federal Government
for violations of its fiduciary responsibilities in the
management of Indian property.” Jd. at 13a (quoting
Mitchell I, 463 U.S. at 228). Federal law provides
the “contours” of those management duties, and
general trust law helps to determine their nature and
scope. See Mitchell II, 463 U.S. at 224-26 & n.30;
Apache, 537 U.S. at 475; Faragher v. City of Boca
Raton, 524 U.S. 775, 788 (1998) (distinguishing
“contours” from “definite rules”).

The Circuit proceeded as this Court instructed.
First, it examined the relevant federal laws to

''The Government attacks the lower court’s statement in
dicta that Government contrel of the Navajo’s coal resources
generally would support the Tribe’s claim even if the
Government had not exercised specific control over leasing,
relying on a rule of statutory construction. Pet. 27-28. This
overreading of dicta is not worthy of review.

26
identify specific “rights-creating [and] duty-imposing”
provisions. Then it applied common-law trust

principles to fill in the contours of the Government’s
management duties, concluding quite properly that
the Government is held to standards of care,!2
loyalty,'3 and candor" in its administration of Navajo
coal. It conciuded, as did the CFC, that the Govern-
ment had breached these basic fiduciary duties. App.
42a. The Government’s view that the Federal Circuit
misunderstood the relevant legal framework is
wrong.

2. Finally, the Government argues that even if the
Federal Circuit correctly stated the applicable legal
standards, it misapplied them here. The Government
likely files numerous oppositions every year urging
this Court to deny petitions that make such an
assertion, and this Court consistently denies these
petitions. In all events, the Government is wrong.

The Government seeks to undermine the Federal
Circuit’s decision first by ignoring the broad bases for
the court’s finding of a full fiduciary relationship
concerning Navajo coal, and then segregating each
statutory provision and regulation to minimize the
cumulative evidence of comprehensive federal control

12 See Apache, 537 U.S. at 475; Mason, 412 U.S. at 398.

13 See Seminole Nation v. United States, 316 U.S. 286, 297
n.12 (1942) (trustee’s duty of loyalty must be enforced with
uncompromising rigidity).

14“A trustee is held to something stricter than the morals of
the market place. Not honesty alone, but the punctilio of an
honor the most sensitive, is then the standard of behavior.”
Seminole, 316 U.S. at 297 n.12 (internal quotation marks
omitted); accord Varity Corp., 516 U.S. at 506 (“|L]ying is
inconsistent with the duty of loyalty owed by all
fiduciaries... .”).

27

and authority. However, it is clear that the Govern-
ment controls or supervises every facet of Navajo coal
development “from the creation of its leases to the
reclamation of land.” Peabody Coal, 761 P.2d at
1099.

The two treaties establish the foundation of the
trust relationship, and regulations under IMLA, at
issue in Navajo, set a floor for Indian coal royalties.
Although these regulations were “designed to protect
the Indians,” Montana v. Blackfeet Tribe of Indians,
471 U.S. 759, 764 (1985), conditions on the Navajo
reservation required that the federal government
assume a more robust role with respect to Navajo
resources. Congress passed the Rehabilitation Act in
response. This Act directed the Secretary to under-
take “a program of basic improvements for the
conservation and development of the resources of the
Navajo.” 25 U.S.C. §631. The leasing here was
accomplished under that Act. App. 62a; C.A. App.
3575. Indeed, as Secretary Udall testified, the leases
at issue were the “centerpiece” of the Act’s resource
development program. C.A. App. 3575.

Moreover, as noted, the Rehabilitation Act requires
the Secretary to approve leases of natural resources
held in trust for the Navajo. App. 33a-34a (citing 25
U.S.C. § 635(a)). In context, that section demon-
strates that the Government is liable for breach of
fiduciary obligation in connection with such
approvals, because the other two subsections of § 635
expressly exempt the United States from liability for
other transactions, while the subsection mandating
secretarial approval of mineral leases does not. As
the court of appeals noted, “[t]he government does not
dispute the Nation’s interpretation [of § 635], and we
agree that government liability from the approval of
such leases is a ‘fair interpretation.” App. 34a.

28

The Government was acting as trustee in exercising
its lease approval function. As Secretary Udall
explained, in

planning and decision making [for the Peabody
lease and related development], I acted in the
capacity as trustee for the Indians, as I
understood the law to require, and I believed
then and do believe now that such trusteeship
was of paramount importance in the Department
of the Interior’s implementation of the develop-
ment program under the... Rehabilitation Act.
[C.A. App. 3575.]

This is the Department’s consistent interpretation
of the Act. See First Mesa Consol. Vills. v. Phoenix
Area Dir., 26 IBIA 18, 27-28 & n.14 (1994) (pursuant
to the Rehabilitation Act, the “BIA must perform its
lease approval function in a manner consistent with
the trust responsibility of the United States for the
management of tribal lands”). This interpretation,
and not the Government’s present litigation posture,
is entitled to considerable deference. See Udall v.
Tallman, 380 U.S. 1, 16 (1965).

The Rehabilitation Act also required that the
Secretary “follow” the Nation’s recommendations
when feasible and that the Tribe be “kept informed
and afforded opportunity to consider from their
inception plans pertaining to the program author-
ized,’ including the ‘program of basic improvements
for the conservation and development of the resources
of the Navajo... Indians.” App. 38a (quoting 25
U.S.C. §§ 631, 638). The Peabody lease at issue was
plainly part of that resource development program,
and the Government had a duty to keep the Navajo
informed of relevant developments. Both the
Rehabilitation Act and SMCRA independently
mandated that the Secretary effect the Tribe's

29

requests and recommendations regarding’ the
resource. development program, 25 U.S.C. § 638; 30
U.S.C. § 1300(e); 30 C.F.R. § 750.20(b) (1987), but the
Secretary rejected the Navajo Nation’s request and
recommendation that the royalty rate be adjusted to
20%, although that figure was found to be proper by
all federal studies. These provisions essentially codify
the Secretary's trust duties of candor and loyalty to
the Navajo in this limited context, and they were
undeniably violated. See App. 38a-42a.15

The Government contends that the Rehabilitation
Act does not create money-mandating duties because
certain of its programs were almost completed around
1964, the year that the original Peabody lease was
approved. Pet. 28-29. This position is contrary to the
consistent position of the Department, see C.A. App.
3575; First Mesa, 26 IBIA at 27-28 & n.14, and to the
natural reading of the Act itself. Although the Act’s
programs related to federal expenditures for schools,
roads, and other infrastructure were financed and
thus complete in the early 1960s, see S. Rep. No. 93-
11, at 1 (1973), the same was net true of the Act’s
general provisions relating to resource development,
including lease approval. Critically, although Con-
gress has amended or repealed several provisions of
the Act, those governing Navajo resource conveyances
(§§ 631, 635) and the Secretary's duties of candor and
loyalty (§ 638) remain intact.

—— —— — —_— —s ee

5 Likewise, under 30 C.F_R. § 750.6(d) (1987), the BIA was
charged with “[cjonsulting directly with... Imdian minerals
owners... in matters relating to surface coal ming and
reclamation operations on Indian lands” but the Department's
secrecy and misinformation campaign precluded compliance
with this regulatory duty, also. See C.A. App. 771, 773, 784,
1027, 4214-19.

30

The Government also incorrectly suggests that the
lease was subject only to IMLA and that the Circuit’s
reliance on the Rehabilitation Act is misplaced. It
selectively cites an excerpt from the Navajo Nation’s
Rule 59 motion filed in 2000 when proceedings were
focused on IMLA. Pet. 31. Subsequently, the CFC,
on remand for further proceedings, properly accepted
additional evidence and argument. See In re Sanford
Fork & Tool Co., 160 U.S. 247, 258-59 (1895). That
evidence included testimony from former Secretary
Udall and Peabody’s counsel demonstrating that the
lease was drafted and approved by the Department of
the Interior under the Rehabilitation Act, C.A. App.
3575, 4261-62; Austin v. Andrus, 638 F.2d 113, 114
(9th Cir. 1981), and bore no resemblance to the
Interior form lease required under IMLA. See supra
at 4-5; App. 62a (describing lease as centerpiece of
Rehabilitation Act programs).

In sum, the Federal] Circuit’s determination that
federal law imposed money-mandating duties on the
United States in connection with coal leasing
approval is correct.

Ill. THIS CASE HAS LITTLE CONSEQUENCE
FOR ANY OTHER CASE.

This case arises from events occurring almost a
quarter-century ago under a regulatory scheme that
had limited application and has been completely
changed since that time. Recurrence of the issue
presented is impossible.

First, one of the key statutes, the Rehabilitation
Act applies to only two tribes, the Navajo and Hopi,
and another, SMCRA, applies only to these two tribes
and one other, since the fourth tribe having
strippable coal has decided not to allow coal mining
on its lands. See, e.g., H.R. Rep. No. 95-218, at 84

A.

31

(1977) (reflecting only four coal-leasing tribes); Act of
Oct. 9, 1980, Pub. L. No. 96-401, 94 Stat. 1701
(cancelling all coal leases on Northern Cheyenne
Reservation).

Second, the Department has amended the regula-
tion in effect from 1984-1987 that mandated inclusion
of non-economic terms in coal leases requested by
tribes. See 54 Fed. Reg. 22,182, 22,187 (May 22,
1989) (amending 30 C.F.R. § 750.20(b) (1987)).

Third, after 30 years of comprehensive federal
regulation of surface coal mining on Indian lands,
Congress recently authorized the tribes to undertake
full responsibility. ‘lax Relief and Health Care Act of
2006, Pub. L. No. 109-432, § 209, 119 Stat. at 3019 (to
be codified at 30 U.S.C. § 1300(j)).

Fourth, the Department completely overhauled the
regulations under Indian mineral! leasing statutes in
1996. 61 Fed. Reg. 35,634 (July 8, 1996) (promul-
gating 25 C.F.R. pt. 211). And, in 2005 “Congress
authorized the most significant change in the way
energy resources can be developed since... [IMDA]
{in the] Indian Tribal Energy Development and Self-
Determination Act,” 25 U.S.C. §§ 3501-3506
(““ITEDSDA”). Cohen's Handbook of Federal Indian
Law, 2007 Supp. at 114 (Nell J. Newton ed. 2005),
(footnotes omitted). The ITEDSDA permits any tribe
to lease its minerals without federal approval once
the tribe enters into an energy resource agreement
with the Secretary under 25 U.S.C. § 3504(e).
Congress specifically addressed the Secretary’s trust
duties there. See 25 U.S.C. § 3504(e)(6). This high-
lights the contrasting federal approval requirements
that existed when the Peabody lease was negotiated.
See id. §§ 396a; 635(a).

32

The facts here simply cannot recur. They concern a
royalty adjustment term not found in any other
Indian mineral lease (including the Hopi lease at
issue in its tag-along case, see Pet. 32) and
complicated circumstances arising out of Peabody’s
appeal of the BIA’s royalty adjustment decision under
that lease term. These peculiar facts include a
warning by the Solicitor’s Office of what would
happen if the Navajo learned of the Secretary’s
collusion with Peabody and his “march or die”
instruction not to raise the royalty rate. C.A. App.
771; App. 128a. They include the Department’s
intentional deception of the Navajo leadership.

The notion that imposing liability in this case will
leave the BIA unsure of what may or may not be
permissible conduct (Pet. 32-33) is silly. Neither then
nor today can the Department plausibly claim doubt
as to the propriety of the Secretary “meet([ing]
secretly with parties having interests adverse to
those of the trust beneficiary, adopt[ing] the third
parties’ desired course of action in lieu of action
favorable to the beneficiary, and then mislead[ing]
the beneficiary concerning these events.” App. 136a.
Everyone involved knew the Department was
breaching its trust; that is why the Department
painstakingly concealed the facts not just from the
Navajo Nation, but even from the BIA. Jd. at 128a-
129a, 138a-139a; C.A. App. 771, 773, 784 (BIA Area
Director “NOT” to be told of status of appeal), 2823
(only time in Area Director’s career that he was
refused such a status report).

This Court established the governing principles in
Indian trust cases in the Mitchell cases in the early
1980s and recently explicated and refined the law in
the companion Navajo and Apache cases. The court
of appeals correctly stated the law established by this

33

Court. App. 10a-14a, 24a. The Court of Federal
Claims understands the limited reach of the decision
below. See Samish Indian Nation v. United States,
82 Fed. Cl. 54, 65-66 (2008).'® This Court has denied
rev.ew in similar cases.17 The issue presented here
will not recur. The interlocutory nature of the
decision, which counsels against review, reinforces
that certiorari should be denied. See VMI v. United
States, 508 U.S. 946 (1993) (Scalia, J., respecting
denial of petition for writ of certiorari); Brotherhood
of Locomotive Firemen v. Bangor & Aroostook R.R.,
389 U.S. 327, 328 (1967) (per curiam).

The Government claims that the decision below will
significantly expand the United States’ trust responsibilities,
citing Wolfchild v. United States, 78 Fed. Cl. 472 (2007),-appeal
pending, No. 2008-5018 (Fed. Cir.), as an exemplar. Pet. 32.
Nothing in Wolfchild supports the ©overnment's characteri-
zation. The CFC cited the decision below solely to support the
settled proposition that a fiduciary relationship normally exists
where the Government has cortrvui or supervision over tribal
monies or properties. See 78 Fed. Ci. at 483 n.i5.

17 See United States v. Shoshone Indian Tribe, 544 U.S. 973
(2005); Eastern Shoshone Tribe v. United States, 544 U.S. 973
(2005).

34

CONCLUSION
The petition should be denied.
Respectfully submitted,

PAUL E. FRYE CARTER G. PHILLIPS*
FRYE LAW FIRM, P.C. VIRGINIA A. SEITZ
10400 Academy Rd. NE — SIDLEY AUSTIN LLP
Suite 310 1501 K Street, N.W.

Albuquerque, NM 87111 Washington, D.C. 20005
(202) 736-8000

LOUIS DENETZOSIE

ATTORNEY GENERAL

THE NAVAJO NATION

P. O. Box 2010

Window Rock, AZ 86515

Counsel for Respondent
August 4, 2008 *Counsel of Record

ADDENDA

1
ADDENDUM A

25 U.S.C. § 631. Basic program for conservation and
development of resources; projects;
appropriations

In order to further the purposes of existing treaties
with the Navajo Indians, to provide facilities,
employment, and services essential in combating
hunger, disease, poverty, and demoralization among
the members of the Navajo and Hopi Tribes, to make
available the resources of their reservations for use in
‘promoting a self-supporting economy and self-reliant
communities, and to lay a stable foundation on which
these Indians can engage in diversified economic
activities and ultimately attain standards of living
comparable with those enjoyed by other citizens, the
Secretary of the Interior is authorized and directed to
undertake, within the limits of the funds from time to
time appropriated pursuant to this subchapter, a
program of basic improvements for the conservation
and development of the resources of the Navajo and
Hopi Indians, the more productive employment of
their manpower, and the supplying of means to be
used in their rehabilitation, whether on or off the
Navajo and Hopi Indian Reservatious. Such program
shall include the following projects for which capital
expenditures in the amount shown after each project
listed in the following subsections and totaling
$108,570,000 are authorized to be appropriated:

(1) Soil and water conservation and range improve-
ment work, $10,000,000.

(2) Completion and extension of existing irrigation
projects, and completion of the investigation to
determine the feasibility of the proposed San Juan-
Shiprock irrigation project, $9,000,000.

2

(3) Surveys and studies of timber, coal, mineral, and
other physical and human resources, $500,000.

(4) Development of industrial and business enter-
prises, $1,000,000.

(5) Development of opportunities for off-reservation
employment and resettlement and assistance in
adjustments related thereto, $3,500,000.

(6) Relocation and resettlement of Navajo and Hopi
Indians (Colorado River Indian Reservation),
$5,750,000. ;

(7) Roads and trails, $40,000,000; of which not less
than $20,000,000 shall be (A) available for contract
authority for such construction and improvement of
the roads designated as route 1 and route 3 on the
Navajo and Hopi Indian Reservations as may be
necessary to bring the portion of such roads located in
any State up to at least the secondary road standards
in effect in such State, and (B) in addition to any
amounts expended on such roads under the
$20,000,000 authorization provided under this clause
prior to amendment.

(8) Telephone and radio communication systems,
$250,000.

(9) Agency, institutional, and domestic water supply,
$2,500,000.

(10) Establishment of a_ revolving loan fund,
$5,000,000.

(11) Hospital buildings and equipment, and other
health conservation measures, $4,750,000.

(12) School buildings and equipment, and other
educational measures, $25,000,000.

(13) Housing and necessary facilities and equipment,
$820,000.

3

(14) Common service facilities, $500,000.

Funds so appropriated shall be available for admini-
stration, investigations, plans, construction, and al]
other objects necessary for or appropriate to the
carrying out of the provisions of this subchapter.
Such further sums as may be necessary for or
appropriate to the annual operation and maintenance
of the projects herein enumerated are also authorized
to be appropriated. Funds appropriated under these
authorizations shall be in addition to funds made
available for use on the Navajo and _ Hopi
Reservations, or with respect to Indians of the Navajo
Tribes, out of appropriations heretofore or hereafter
granted for the benefit, care, or assistance of Indians
in general, or made pursuant to other authorizations
now in effect.

25 U.S.C. § 632. Character and extent of admini-
stration; time limit; reports on use of
funds

The foregoing program shal! be administered in
accordance with the provisions of this subchapter and
existing laws relating to Indian affairs, shall include
such facilities and services as are requisite for
incidental to the effectuation of the projects herein
enumerated, shall apply sustained-yield principles to
the administration of all renewable resources, and
shall be prosecuted in a manner which will provide
for completion of the program, so far as practicable,
within ten years from April 19, 1950. An account of
the progress being had in the rehabilitation of the
Navajo and Hopi Indians, and of the use made of the
funds appropriated to that end under tliis
subchapter, shal] be included in each annual report of
the work of the Department of the Interior submitted
to the Congress during the period covered by the
foregoing program.

4

25 U.S.C. § 633. Preference in employment; on-the-
job training

Navajo and Hopi Indians shall be given, whenever
practicable, preference in employment on all projects
undertaken pursuant to this subchapter, and, in
furtherance of this policy may be given employment
on such projects without regard to the provisions of
the civil-service and classification laws. To the fullest
extent possible, Indian workers on such projects shall
receive on-the-job training in order to enable them to
become qualified for more skilled employment.

25 U.S.C. § 634. Loans to Tribes or individual mem-
bers; loan fund

The Secretary of the Interior is authorized, under
such regulations as he may prescribe, to make loans
from the loan fund authorized by section 631 of this
title to the Navajo Tribe, or any member or
association of members thereof, or to the Hopi Tribe,
or any member or association of members thereof, for
such productive purposes as, in his judgment, will
tend to promote the better utilization of the
manpower and resources of the Navajo or Hopi
Indians. Sums collected in repayment of such loans
and sums collected as interest or other charges
thereon shall be credited to the loan fund, and shall
be available for the purpose for which the fund was
established.

25 U.S.C. § 635. Disposition of Jands
(a) Lease of restricted lands; renewals

Any restricted Indian lands owned by the Navajo
Tribe, members thereof, or associations of such
members, or by the Hopi Tribe, members thereof, or
associetions of such members, may be leased by the
Indiar wners, with the approval of the Secretary of

5

the Interior, for public, religious, educational,
recreational, or business purposes, including the
development or utilization of natural resources in
connection with operations under such leases. All
leases so granted shall be for a term of not to exceed
twenty-five years, but may include provisions
authorizing their renewal for an additional term of
not to exceed twenty-five years, and shall be made
under such regulations as may be prescribed by the
Secretary. Restricted allotments of deceased Indians
may be leased under this section, for the benefit of
their heirs or devisees, in the circumstances and by
the persons prescribed in section 380 of this title.
Nothing contained in this section shall be construed
to repeal or affect any authority to lease restricted
Indian lands conferred by or pursuant to any other
provision of law.

(b) Lease, sale, or other disposition of lands owned in
fee simple by Navajo Tribe

Notwithstanding any other provision of law, land
owned in fee simple by the Navajo Tribe may be
leased, sold, or otherwise disposed of by the sole
authority of the Navajo Tribal Council, in any
manner that similar land in the State in which such
land is situated may be leased, sold, or otherwise
disposed of by private landowners, and_ such
disposition shall create no liability on the part of the
United States.

(c) Transfer of unallotted lands to tribally owned or
municipal corporations

The Secretary of the Interior is authorized to
transfer, upon request of the Navajo Tribal Council,
to any corporation owned by the tribe and organized
pursuant to State law, or to any municipal
corporation organized under State law, legal title to

6

or a leasehold interest in any unallotted lands held
for the Navajo Indian Tribe, and thereafter the
United States shall have no responsibility or liability
for, but on request of the tribe shall render advice
and assistance in, the management, use, or
disposition of such lands.

25 U.S.C. § 636. Adoption of constitution by Navajo
Tribe; method; contents

In order to facilitate the fullest possible participation
by the Navajo Tribe in the program authorized by
this subchapter, the members of the tribe shall have
the right to adopt a tribal constitution in the manner
herein prescribed. Such constitution may provide for
the exercise by the Navajo Tribe of any powers vested
in the tribe or any organ thereof by existing law,
together with such additional powers as the members
of the tribe may, with the approval of the Secretary of
the Interior, deem proper to include therein. Such
constitution shall be formulated by the Navajo Tribal
Council at any regular meeting, distributed in
printed form to the Navajo people for consideration,
and adopted by secret ballot of the adult members of
the Navajo Tribe in an election held under such
regulations as the Secretary may prescribe, at which
a majority of the qualified votes cast favor such
adoption. The constitution shall authorize the fullest
possible participation of the Navajos in the
administration of their affairs as approved by the
Secretary of the Interior and shall become effective
when approved by the Secretary. The constitution
may be amended from time to time in the same
manner as herein provided for its adoption, and the
Secretary of the Interior shall approve any
amendment which in the opinion of the Secretary of
the Intevior advances the development of the Navajo
people coward the fullest realization and exercise of

7

the rights, privileges, duties, and responsibilities of
American citizenship.

25 U.S.C. § 637. Use of Navajo tribal funds

Notwithstanding any other provision of existing law,
the tribal funds now on deposit or hereafter placed to
the credit of the Navajo Tribe of Indians in the
United States Treasury shall be available for such
purposes as may be designated by the Navajo Tribal
Council and approved by the Secretary of the
Interior.

25 U.S.C. § 638. Participation by Tribal Councils;
recommendations

The Tribal Councils of the Navajo and Hopi Tribes
and the Indian communities affected shall be kept
informed and afforded opportunity to consider from
their inception plans pertaining to the program
authorized by this subchapter. In the administration
of the program, the Secretary of the Interior shall
consider the recommendations of the tribal councils
and shall follow such recommendations whenever he
deems them feasible and consistent with the
objectives of this subchapter.

25 U.S.C. § 639. Repealed. Pub. L. No. 104-193, tit. I,
§ 110(u), 110 Stat. 2175 (Aug. 22, 1996).

25 U.S.C. § 640. Repealed. Pub. L. No. 93-531, § 26,
88 Stat. 1723 (Dec. 22, 1974).

8
ADDENDUM B

30 U.S.C. § 1300. Indian lands

(a) Study of regulation of surface mining; consul-
tation with tribe; proposed legislation

The Secretary is directed to study the question of the
regulation of surface mining on Indian lands which
will achieve the purpose of this chapter and recognize
the special jurisdictional status of these lands. In
carrying out this study the Secretary shall consult
with Indian tribes. The study report shall include
proposed legislation designed to allow Indian tribes to
elect to assume full regulatory authority over the
administration and enforcement of regulation of
surface mining of coal on Indian lands.

(b) Submittal of study to Congress

The study report required by subsection (a) of this
section together with drafts of proposed legislation
and the view of each Indian tribe which would be
affected shall be submitted to the Congress as soon as
possible but not later than January 1, 1978.

_ (c) Compliance with interim environmental protection
standards of this chapter

On and after one hundred and thirty-five days from
August 3, 1977, all surface coal mining operations on
Indian lands shall comply with requirements at least
as stringent as those imposed by subsections (b)(2),
(b)(3), (b)(5), (b)(10), (b)(13), (b)(19), and (d) of section
1265 of this title and the Secretary shall incorporate
the requirements of such provisions in all existing
and new leases issued for coal on Indian lands.

(d) Compliance with permanent environmental pro-
tection standards of this chapter

a i a

9

On and after thirty months from August 3, 1977, all
surface coal mining operations on Indian lands shall
comply with requirements at least as stringent as
those imposed by sections 1257, 1258, 1259, 1260,
1265, 1266, 1267, and 1269 of this title and the
Secretary shall incorporate the requirements of such
provisions in al] existing and new leases issued for
coal on Indian lands.

(e) Inclusion and enforcement of terms and conditions
of leases

With respect to leases issued after August 3, 1977,
the Secretary shall mclude and enforce terms and
conditions in addition to those required by
subsections (c) and (d) of this section as may be
requested by the Indian tribe in such leases.

(f) Approval of changes in terms and conditions of
leases

Any change required by subsection (c) or (d) of this
section in the terms and conditions of any coal lease
on Indian lands existing on August 3, 1977, shall
require the approval of the Secretary.

(g) Participation of tribes

The Secretary shall provide for adequate partici-
pation by the various Indian tribes affected in the
study authorized in this section and not more than
$700,000 of the funds authorized in section 1302(a) of
this title shall be reserved for this purpose.

(h) Jurisdictional! status

The Secretary shall analyze and make recommen-
dations regarding the jurisdictional status of Indian.
Lands” outside the exterior boundaries of Indian

‘8 So in original. Probably should be “lands”.

tan Rt i

10

reservations: Provided, That nothing in this chapter
shall change the existing jurisdictional status of
Indian Lands!.

(i) Grants

The Secretary shall make grants to the Navajo, Hopi,
Northern Cheyenne, and Crow tribes to assist such
tribes in developing regulations and programs for
regulating surface coal mining and reclamation
operations on Indian lands. Grants made under this
subsection shall be used to establish an office of
surface mining regulation for each such tribe. Each
such office shall—

(1) develop tribal regulations and program policies
with respect to surface mining;

(2) assist the Office of Surface Mining Reclamation
and Enforcement established by section 1211 of this
title in the inspection and enforcement of surface
mining activities on Indian lands, including, but not
limited to, permitting, mine plan review, and bond
release; and

(3) sponsor employment training and education in the
area of mining and mineral resources. é
* * * *

11
ADDENDUM C

25 C.F.R. PT. 211 (1987)

PART 211—LEASING OF TRIBAL LANDS FOR
MINING

AUTHORITY: Secs. 16, 17. 48 Stat. 987, 988, sec. 9,
49 Stat. 1968, sec. 4. 52 Stat. 348; 25 U.S.C. 396d,
476, 477, 509. Interpret or apply secs. 1, 2, 49 Stat.
1250: 48 U.S.C. 358a. 362, unless otherwise noted.

SOURCE: 22 FR 10588, Dec. 24, 1957, unless
otherwise noted. Redesignated at 47 FR 13327. Mar.
30, 1982.

§ 211.1 Definitions.

(a) The term “superintendent” in this part refers to
the supermtendent or other officer of the Bureau of
Indian Affairs or of the Government who may have
jurisdiction over the lands involved. |

(b) The term “supervisor” in this part refers to a
representative of the Secretary of the Interior, under
direction of the United States Geological Survey,
authorized and empowered to supervise and direct
operations under oil and gas or other mining leases,
to furnish scientific and technical information and
advice, to ascertain and record the amount and value
of production, and_to determine and record rentals
and royalties due and paid.

CROSS REFERENCE: For rules and regulations of the
Geological Survey, see 30 CFR Chapter I].

lM ge te a ae 8 i ie el _. it .

12
How To ACQUIRE LEASES

§ 21l.la Existing permits or leases on minerals
acquired for the Ute Indian Tribe of the Uintah
and Ouray Reservation, Utah, and the Pueblos of
Zia avd Jemez, New Mexico.

By the Act of July 14, 1956 (70 Stat. 546), title to
the minerals underlying certain lands in Utah was
vested in the United States in trust for the Ute
Indian Tribe of the Uintah and Ouray Reservation
and by the Act of August 2, 1956 (70 Stat. 941), title
to certain land in New Mexico and the improvements
thereon was declared to be in the United States of
America in trust for the Pueblos of Zia and Jemez,
subject to valid and existing rights. Existing mineral
prospecting permits and mining leases on these lands
issued pursuant to 43 CFR and all action on the
permits and leases shall be administered by the
Secretary of the Interior or his authorized
representative in accordance with the regulations set
forth in Title 43 of the Code of Federal Regulations,
except as follows:

(a) Appeals from administrative action shall be
made pursuant to applicable regulations set forth in
this title.

(b) Payments or reports required by the leases,
permits, or regulations in 43 CFR shall be made to
the Superintendent having jurisdiction over the land
involved instead of the officer of the Bureau of Land
Management designated in Title 43 of the Code of
Federal Regulations.

(25 FR 12408, Dec. 3, 1960. Redesignated at 47 FR
13327, Mar. 30, 1982]

13
§ 211.2 Leases to be made by tribes.

Indian tribes, bands or groups may, with the
approval of the Secretary of the Interior or his
authorized representative, lease their land for mining
purposes. No oil and gas lease shall be approved
unless it has first been offered at an advertised sale
in accordance with § 211.3. Leases for minerals other
than oil and gas shall be advertised for bids as
prescribed in § 211.3 unless the Commissioner grants
to the Indian owners written permission to negotiate
for a lease. Negotiated leases, accompanied by proper
bond and other supporting papers, shall be filed with
the Superintendent of the appropriate Indian Agency
within 30 days after such permission shall have been
granted by the Commissioner to negotiate the lease.
The appropriate Area Director is authorized in proper
cases to grant a reasonable extension of this period
prior to its expiration. The right is reserved to the
Secretary of the Interior to direct that negotiated
leases be rejected and that they be advertised for
bids. All leases shall be approved by the Secretary of
the Interior or his duly authorized representative.

(23 FR 9393. Dec. 4, 1958. Redesignated at 47 FR
13327, Mar. 30, 1982]

§ 211.3 Sale of oil and gas leases.

(a) At such times and in such manner as he may
deem appropriate, after being authorized by the
tribal council or other authorized representative of
the tribe, the superintendent shal] publish notices at
least thirty days prior to the sale, unless a shorter
period is authorized by the Commis sioner of Indian
Affairs, that oil and gas leases on specific tracts, each
of which shall be in a reasonably compact body, will
be offered to the highest responsible bidder for a
bonus consideration, in addition to stipulated rentals

14

and royalties. Each bid must be accompanied by a
cashier’s check, certified check or postal money order,
payable to the payee designated in the invitation to
bid, in an amount not less than 25 percent of the
bonus bid. Within 30 days after notification of being
the successful bidder, said bidder must remit the
balance of the bonus, the first year’s rental, and his
share of the advertising costs, and shall file with the
superintendent the lease in completed form. The
superin tendent may, for good and sufficient reasons,
extend the time for the com pletion and submission of
the lease form, but no extension shall be granted for
remitting the balance of moneys due. If the successful
bidder fails to pay the full consideration within said
period, or fails to file the completed lease within said
period or extension thereof, or if the lease is
disapproved through no fault of the lessor or the
Department of the Interior, 25 percent of the bonus
bid will be forfeited for the use and benefit of the
Indian lessor.

(b) All notices or advertisements of sales of oil and
gas leases shall reserve to the Secretary of the
Interior the right to reject all bids when in his
judgment the interests of the Indians will be best
served by so doing, and that if no satisfactory bid is
received, or if the accepted bidder fails to complete
the lease, or if the Secretary of the Interior shall
determine that it is unwise in the interests of the
Indians to accept the highest bid, the Secre tary may
readvertise such lease for sale, or if deemed
advisable, with the consent of the tribal council or
other governing tribal authorities, a lease may be
made by private negotiations. The successful bidder
or bidders will be required to pay his or their share of
the advertising costs. Amounts received from
unsuccessful bidders wil] be returned; but when no

15

bid is accepted on a tract, the costs of advertising will
be assessed against the applicant who requested that
said tract be advertised.

(22 FR 10588, Dec. 24. 1957, as amended at 23 FR
7068, Sept. 12, 1958. Redesignated at 47 FR 13327,
Mar. 30. 1982]

§ 211.3a Leases for subsurface storage of oil or gas.

(a) The Secretary of the Interior, or his authorized
representative, may approve, subject to obtaining the
prior consent of the Indian owners, storage leases, or
modifications, amendments, or extensions of oil and
gas or other mining leases, on tribal lands subject to
lease under the Act of May 11, 1938 (52 Stat. 347; 25
U.S.C. 396a), and on allotted lands subject to lease
under the Act of March 3, 1909 (35 Stat. 783; 25
U.S.C. 396), to provide for the subsurface storage of
oil or gas, irrespective of the lands from which
production is initially obtained. The storage lease, or
modification, amendment, or extension, shall provide
for the payment of such storage fee or rental on such
oil or gas as may be determined adequate in each
case, or, in lieu thereof, for a voyalty other than that
prescribed in the oil and gas lease when such stored
oil and gas is produced in conjunction with oil or gas
not previously produced.

(b) The Secretary of the Interior or his authorized
representative may approve, subject to obtaining the
prior consent of the Indian owners, a provision in an
oil and gas lease, under which storage of oil and gas
is authorized, for continuance of the lease at least for
the period of such storage use and so long thereafter
as oil or gas not previously produced is produced in
paying quantities.

(c) Applications for subsurface storage of oil or gas
shall be filed in triplicate with the oil and gas

16

supervisor and shall disclose the ownership of the
lands involved, the parties in interest, the storage
fee, rental, or royalty offered to be paid for such
storage, and all essential information showing the
necessity for such project. Enough copies of the final
agreement signed by the Indian owners and other
parties in interest shall be submitted for the approval
of the Secretary, or his authorized representative, to
permit retention of five copies by the Department
after approval.

[25 FR 9836, Oct. 14. 1960. Redesignated at 47 FR
13327, Mar. 30, 1982]

§ 211.4 Government employees cannot acquire
leases.

No lease, assignment thereof, or interest therein
will be approved to any employee or employees of the
United States Government whether connected with
the Bureau of Indian Affairs or otherwise, and no
employee of the Interior Department shall be
permitted to acquire any interest in any mineral
lease covering restricted Indian lands by ownership of
stock in corporations having such leases or in any
other manner.

(R.S. 2078; 25 U.S.C. 68)
§ 211.5 Corporations and corporate information.

If the applicant for a lease is a corporation, it shall
file evidence of authority of its officers to execute
papers; and with Its first application it shall also file
a certified copy of its articles of incorporation, and, if
foreign to the State in which the lands are located,
evidence showing compliance with the corporation
laws thereof. Statements of changes in officers and
stockholders shall be furnished by a corporation
lessee to the superintendent January 1 of each year,

17

and at such other times as may be requested.
Whenever deemed advisable in any case _ the
superintendent may require a corporation applicant
or lessee to file:

(a) Lists of officers, principal stockholders, and
directors, with post-office addresses and number of
shares held by each.

(b) A sworn statement of the proper officer showing:

(1) The total number of shares of the capital stock
actually issued and the amount of cash paid into the
treasury on each share sold; or, if paid In property,
the kind, quantity, and value of the same paid per
share.

(2) Of the stock sold, how much remains unpaid and
subject to assessment.

(3) The amount of cash the company has in its
treasury and elsewhere.

(4) The property, exclusive of cash, owned by the
company and its value.

(5) The total indebtedness of the company and the
nature of its obligations.

(6) Whether the applicant or any person controlling,
controlled by or under common control with the
applicant has filed any registration statement,
application for registration, prospectus or offering
sheet with the Securities and Exchange Commission
pursuant to the Securities Act of 1933 or the
Securities Exchange Act of 1934 or said Commission’s
rules and regulations under said acts; if so, under
what provisions of said acts or rules and regulations;
and what disposition of any such statement,
application, prospectus or offering sheet has been
made.

18

(c) Affidavits of individual stockholders, setting
forth in what corporations or with what persons,
firms, or associations such individual] stockholders
are interested in mining leases on restricted lands
within the State, and whether they hold such
interests for themselves or in trust.

CROSS REFERMNCE: For rules and regulations of
the Securities and Exchange Commission, see 17 CFR
Chapter I.

§ 211.6 Bonds.

(a) Lessee shall furnish with each lease a bond
(Form 5-154b), and an assignee of a lease shall
furnish with each assignment a bond (Form 5-154m),
with an acceptable company authorized to act as sole
surety, or with two or more personal sureties and a
deposit as collateral security of any public-debt
obligations of the United States guaranteed as te
principal and interest by the United States, equal to
the full amount of such bonds, or other collateral
satisfactory to the Secretary of the Interior, or show
ownership of unencumbered real estate of the value
equal to twice the amount of the bonds. Lessee may
file a bond on Form 5-154a without sureties and a
deposit as collateral security of Government bonds
equal in value to the full amount of the bond. Lease
bonds shall not be less than the following amounts:

ee ee I iicvctticnervciseebwtiteintesiadedaia $1,000
For 80 acres and less than 120 acres................. 1,500
For 120 acres and not more than 160 acres........ 2.000
For each additional 40 acres, or part thereof,

I FE vccnivectanscccnscesevnttainiannibicinibinieaniee 500

Provided, That for leases for minerals other than oil
and gas the Secretary of the Interior or his
authorized representative with the consent of the

19

Indian landowner may authorize a bond for a lesser
amount if, in his opinion, the circumstances warrant
and the interests of the Indian landowners are fully
protected: Provided further, That a lessee may file
one bond (Form 5-154f), in the sum of $15,000 for all
leases of minerals, in any one State and which may
also include leases on that part of an Indian
reservation extending into State contiguous thereto,
to which the lessee may become a party: And
provided further, That the total acreage covered by
the bond shall not exceed 10,240 acres.

(b) In lieu of the bonds required under paragraph
(a) of this section, a lessee may furnish a bond (Form
5-156) in the sum of $75,000 for full nationwide
coverage with an acceptable company authorized to
act as sole surety to cover all oil and gas leases and
oil and gas prospecting permits without geographic or
acreage limitation to which the lessee or permittee is
or may become a party.

(c) The right is specifically reserved to increase the
amount of bonds and the collateral security
prescribed in paragraph (a) of this section in any
particular case when the officer in charge deems it
proper to do so. The nationwide bond may be
increased at any time in the discretion of the
Secretary of the Interior.

[22 FR 10588. Dec. 24, 1957, as amended at 26 FR
164, Jan. 10, 1961. Redesignated at 47 FR 13327,
Mar. 30. 1982]

§ 211.7 Lessees to furnish additional] information.

The superintendent may, either before or after
approval of a lease, call for any additional!
information desired to carry out the regulations in
this part. If a lessee shall fail to furnish the papers
necessary to put his lease and bond in proper form for

20

consideratlon, the superintendent shall forward such
lease for disapproval.

§ 211.8 Lands to be in compact body.

The area covered by a lease shall be in a reasonably
compact body and shall conform to the system of
public-land surveys, except that leases covering lode
ground may consist of one or more adjoining
parallelograms 1,500 feet in length by 600 feet in
width, as provided by the United States mining laws.
No lease under the regulations in this part shall
convey any extralateral rights, and no coal lease shall
have a length exceeding 1 mile along the out-crop.

§ 211.9 Acreage limitation.

A lessee may acquire more than one lease but no
single lease shall be granted for mining purposes on
Indian tribal or restricted Indian lands, exclusive of
Osage and Quapaw lands, in excess of the following
acreage except where the rule of approximation
applies:

(a) For oil and gas and all other minerals, except
coal, 2,560 acres.

(b) (1) For coal, a lease shall ordinarily be limited to
2,560 acres. The Commissioner may, however, upon
application, approve the combining of leases held by
one or more lessees, or approve the issuance of a
single lease for more than 2,560 acres in a reasonably
compact form, if he shall find that the approval of
such larger acreage is in the interest of the lessor and
is necessary to permit the establishment or
construction of thermal electric power plans or other
industrial facilities on or near the reservation. He
may prescribe provisions in such larger leases to
require relinquishment of acreage in the event of
failure to construct facilities, or may require advance

21

rental or minimum royalty payments on a part of the
acreage as a condition for combining leases or
issuance of a single lease in excess of 2,560 acres.

(2) The Commissioner, with the consent of the
lessor, may alter, change, or modify the development
and producing requirements of the several leases and
provide that operations and production on one lease
shall be deemed to satisfy the development and
producing requirements as to each lease combined.

§ 211.10 Term of leases.

Mining leases may be made for a specified term not
to exceed ten years from the date of approval by the
Secretary of the Interior, or his authorized
representative, and as much longer as the substances
specified in the lease are produced in paying
quantities.

§ 211.11 Government reserves right to buy minerals
produced.

In time of war or other public emergency all of the
executive departments of the United States
Government shall have the option to purchase at the
posted market price on the date of sale all or any part
of the substance or substances produced under any
lease.

RENTS AND ROYALTIES
§ 211.12 Manner of payments.

(a) Except where otherwise provided by the terms
of leases where the tribes are organized under the act
of June 18, 1934 (48 Stat. 954; 25 U.S.C. 461-479), all
rents and other payments due under leases which
have been or may be approved by the Secretary of the
Interior shall be paid to the superintendent or to such
other person as may be designated by the Secretary

22

of the Interior, for the benefit of the lessors. Except
advance payments for the first year which shall be
sent direct to the superintendent at the time of filing
leases, payments of rental and royalty under leases
shall be transmitted through the supervisor, sha}l be
accompanied by a statement by the lessee, in
triplicate, showing the specific items of rental or
royalty that the remittance is intended to cover, and
shall be made at such time or times as the lease
provides.

(b) In the event of the discovery of minerals in
paying quantities all advance payments shall be
allowed as credit on stipulated royalties for the year
for which such advance payments have been made.
No refund will be made under oil, gas, or other
mining leases, in the event that royalty from
production is not sufficient to equal the advance
payment, nor will any part of the moneys so paid be
refunded to the lessee because of any subsequent
surrender or cancellation of the lease, nor shall the
lessee be relieved from the obligation to pay said
advance rental annually when it becomes due, by
reason of any subsequent surrender or cancellation of
the lease.

§ 211.13 Rates of rentals and royalties under oil and
gas leases.

(a) The lessee shall pay, beginning with the date of
approval of oil and gas leases by the Secretary of the
Interior, a rental of $1.25 per acre per annum in
advance during the continuance thereof, together
with a royalty of 12 /2 percent of the value or amount
of all oil, gas, and/or natural gasoline, and/or all other
hydrocarbon substances produced and saved from the
land leased, save and except oil, and/or gas used by
the lessee for development and operation purposes on
the lease, which oil or gas shall be royalty free. A

23

higher rate of royalty may be fixed by the Secretary
of the Interior or his authorized representative, prior
to the advertisement of Jand for oil and gas leases.
During the period of supervision, “value” for the
purposes of the lease may, in the discretion of the
Secretary of the Interior, be calculated on the basis of
the highest price paid or offered (whether calculated
on the basis of short or actual volume) at the time of
production for the major portion of the oil of the same
gravity, and gas, and/or natural gasoline, and/or al]
other hydrocarbon substances produced and sold from
the field where the leased lands are situated, and the
actual volume of the marketable product less the
content of foreign substances as determined by the
supervisor. The actual amount realized by the lessee
from the sale of said products may, in the discretion
of the Secretary of the Interior, be deemed mere
evidence of or conclusive evidence of such value.
When paid in value, such royalties shall be due and
payable monthly on the last day of the calendar
month following the calendar month in which
produced; when royalty on oil produced is paid in
kind, such royalty oil shall be delivered in tanks
provided by the lessee on the premises where
produced without cost to the lessor unless otherwise °
agreed to by the parties thereto, at such time as may
be required by the lessor. The lessee shall not be
required to hold such royalty oil in storage longer
than 30 days after the end of the calendar month in
which said oil is produced. The lessee shall be in no
manner responsible or held liable for loss or
destruction of such oil in storage by causes beyond
the lessee’s control. In determining the value for
royalty purposes of products, such as _ natural
gasoline, that are derived from treatment of gas, a
reasonable allowance for the cost of manufacture
shall be made, such allowance to be two-thirds of the

24

value of the marketable product unless otherwise
determined by the Secretary of the Interior on
application of the lessee or on his own initiative, and
that royalty will be computed on the value of gas or
casing-head gas, or on the products thereof (such as
residue gas, natural gasoline, propane, butane, etc.),
whichever is the greater.

(b) If the leased premises produce gas in excess of
the lessee’s requirements for the development and
operation of said premises, then the lessor may use
sufficient gas, free of charge, for any desired school or
other buildings belonging to the tribe, by making his
own connections to a regulator installed, connected to
the well and maintained by the lessee, and the lessee
shall not be required to pay royalty on gas so used.
The use of such gas shall be at the lessor’s risk at all
times.

§ 211.14 Annual rentals and _ expenditures for
development on leases other than oil and gas.

(a) Unless otherwise authorized by the Secretary or
his authorized representative (1) a lease for minerals
other than oil and gas shall provide for a yearly
development expenditure of not less than $10 per
acre and (2) all such leases shall provide for a rental
payment of not less than $1 for each acre or fraction
of an acre payable on or before the first day of each
lease year.

(b) Within 20 days after the lease year, an itemized
statement, in duplicate, of the expenditure for
development under a lease for minerals other than oil
and gas shall be filed with the Superintendent. The
lessee must certify the statement under oath.

25

§ 211.14a Suspension of operations and production
on leases for minerals other than cil and gas.

The Secretary of the Interior or his authorized
representative, after cbtaining the consent of the
tribe, may authorize suspension of operating and
producing requirements on mining leases for
minerals other than oil and gas whenever during the
primary term of the leases, it is considered that
marketing facilities are inadequate or economic
conditions unsatisfactory. Applications by lessees for
relief from all operating and producing requirements
on such mineral leases shall be filed in triplicate, in
the office of the Regional Mining Supervisor of the
Geological Survey and a copy thereof filed with the
Superintendent. Complete information must be
furnished showing the necessity for such relief.
Suspension of operations and production shall not
relieve the lessee from the obligations of continued
payment of the annual rental or the minimum
royalty.

(24 FR 9510, Nov. 26, 1959. Redesignated at 47 FR
13327, Mar. 30. 1982]

§ 211.15 Royalty rates for minerals other than oil
and gas.

Unless otherwise authorized by the Commissioner
of Indian Affairs, the minimum rates for minerals
other than oil and gas shall be as follows:

(a) For substances other than gold, silver, copper,
lead, zinc, tungsten, coal, asphaltum and allied
substances, oil, and gas, the lessee shall pay
quarterly or as otherwise provided in the lease, a
royalty of not less than 10 percent of the value, at the
nearest shipping point, of all ores, metals, or
minerals marketed.

26

(b) For gold and silver the lessee shall pay
quarterly or as otherwise provided in the lease, a
royalty of not less than 10 percent to be computed on
the value of bullion as shown by mint returns after
deducting forwarding charges to the point of sale; and
for copper, lead, zinc, and tungsten, a royalty of not
less than 10 percent to be computed on the value of
ores and concentrates as shown by reduction returns
after deducting freight charges to the point of sale.
Duplicate returns shall be filed by the lessee with the
Superintendent within 10 days after the ending of the
quarter or other period specified in the lease within
which such returns are made: Provided, however,
That the lessee shall pay a royalty of not less than 10
percent of the value of the ore or concentrates sold at
the mine unless otherwise provided in the lease.

(c) For coal the lessee shall pay quarterly or as
otherwise provided in the lease, a royalty of not less
than 10 cents per ton of 2,000 pounds of mine run, or
coal as taken from the mine, including what is
commonly called “slack”.

(d) For asphaltum and allied substances the lessee
shall pay quarterly or as otherwise provided in the
lease, a royalty of not less than 10 cents per ton of
2,000 pounds on crude material or not less than 60
cents per ton on refined substances.

§ 211.16 Time of making royalty payments.

Royalty payments under producing oil and gas
leases shall be made monthly on or before the last
day of the calendar month following the calendar
month for which such payment is to be made.

§ 211.17 Division orders.

(a) Lessees may make arrangements with the
purchasers of oil for the payment of the royalties to

27

the superintendent by such purchasers, but such
arrangement, if made, shall not operate to relieve a
lessee from responsibility should the purchaser fail or
refuse to pay royalties when due. Where lessees avail
themselves of this. privilege, division orders
permitting the pipe line companies or other
purchasers of the oil to withhold the royalty interest
shall be executed and forwarded to the supervisor for
approval, as pipe line companies are not permitted to
accept or run oi] from leased Indian lands until after
the approval of a division order showing that the
lessee has a lease regularly approved and in effect.
When the lessee company runs its own oil, it shall
execute an intra-company division order and forward
it to the supervisor for his consideration. The right is
reserved for the supervisor to cancel a division order
at any time or require the pipe line company to
discontinue to run the oil of any lessee’ who fails to
operate the lease properly or otherwise violates the
provisions of the lease, of the regulations in this part,
or of the operating regulations.

(b) When oil is taken by authority of a division
order, the lessee or his representative shall be
actually present when the oil is gauged and records
are made of the temperature, gravity, and impurities.
The lessee will be held responsible for the correctness
and the correct recording and reporting of all of the
foregoing measurements; which, except lowest gauge,
shall be made at the time the oil is turned into the
pipe line. Failure of the lessee to perform properly
these duties will subject the division order to
revocation.

Cross REFERENCE: For oil and gas operating
regulations of the Geological Survey, see 30 CFR Part
221.

28
§ 211.18 Inspection of premises, books and accounts.

Lessees shall agree to allow the lessors and their
agents or any authorized representative of the
Interior Department to enter, from time to time, upon
and into all parts of the leased premises for the
purpose of inspection, and shall further agree to keep
a full and correct account of all operations and make
reports thereof, as required by the regulations of the
Department governing operations on public and
restricted Indian lands; and their books and records,
showing manner of operations and _ persons
interested, shall be open at all times for examination
of such officers of the Department as shall be
instructed in writing by the Secretary of the Interior
or authorized by regulations to make _ such
examination.

§ 211.19 Diligence and prevention of waste.

The lessee shall exercise diligence in drilling and
operating wells for oil and gas on the leased lands
while such products can be secured in paying
quantities; carry on all operations in a good and
workmanlike manner in accordance with approved
methods and practice, having due regard for the
prevention of waste of oil or gas developed on the
land, or the entrance of water through wells drilled
by the lessee to the productive sands or oil or gas-
bearing strata to the destruction or injury of the oil or
gas deposits, the preservation and conservation of the
property for future productive operations, and to the
health and safety of workmen and employees; plug
securely all wells before abandoning the same and to
shut off effectually all water from the oil or gas-
bearing strata; not drill any well within 200 feet of
any house or barn on the premises without the
lessor’s written consent approved by the superin-
tendent; carry out at his expense all reasonable

29

orders and requirements of the supervisor relative to
prevention of waste, and preservation of the property
and the health and safety of workmen; bury all pipe-
lines crossing tillable lands below plow depth unless
other arrangements therefor are made with the
superintendent; pay the lessor all damages to crops,
buildings, and other improvements of the lessor
occasioned by the lessee’s operations: Provided, That
the lessee shall not be held responsible for delays or
casualties occasioned by causes beyond the lessee’s
control.

§ 211.20 Permission to start operations.

(a) No operations will be permitted on any lease
before it it approved by the Secretary of the Interior.

(b) Written permission must be secured from the
supervisor before any operations are started on the
leased premises. After such permission is secured the
operations must be in accordance with the operating
regulations promulgated by the Secretary of the
Interior. Copies of the regulations in this -part may
be secured from either the supervisor or the
superintendent and no operations shall be attempted
witnout a study of the operating regulations.

§ 211.21 Restrictions on operations.

(a) Oil and gas leases issued under the provisions of
the regulations in this part shall be subject to
imposition by the Secretary of the Interior of such
restrictions as to time or times for the drilling of
wells and as to the production from any well or wells
as in his judgment may be necessary or proper for the
protection of the natural resources of the leased land
and in the interest of the lessor. In the exercise of his
judgment the Secretary of the Interior may take into
consideration, among other things, the Federal laws.
State laws, regulations by competent Federal or State

30

authorities, lawful agreements among operators
regulating either drilling or production, or both, and
any regulatory action desired by tribal authorities.

(b) All such leases shall be subject to any
cooperative or unit development plan affecting the
leased lands that may be required by the Secretary of
the Interior, but no lease shall be included in any
cooperative or unit plan without prior approval of the
Secretary of the Interior and consent of the Indian
tribe affected.

§ 211.22 Penalties.

Failure of the lessee to comply with any provisions
of the lease, of the operating regulations, of the
regulations in this part, order of the superintendent
or his representative, or of the orders of the
supervisor or his representative, shall subject the
lease to cancellation by the Secretary of the Interior
or the lessee to a penalty of not more than $500 per
day for each and every day the terms of the lease, the
regulations, or such orders are violated; or to both
such penalty and cancellation: Provided, That the
lessee shall be entitled to notice and hearing, within
30 days after such notice, with respect to the terms of
the lease, regulations, o: orders violated, which
hearing shall be held by the supervisor, whose
findings shall be conclusive unless an appeal be taken
to the Secretary of the Interior within 30 days after
notice of the supervisor’s decision, and the decision of
the Secretary of the Interior upon appeal shall be
conclusive.

§ 211.23 Mines to be timbered properly.

In mining operations the lessee shall keep the mine
well and sufficiently timbered at all points where
necessary, in accordance

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0086%3A0. Public record. Not legal advice.