Constitutional Law: Federal Preemption Indian Oil and Gas Leases: State Severance Tax

摘要

The Ute Tribe brings this action challenging the imposition of a number of New Mexico taxes on oil and gas operations that take place on the Ute Reservation. These taxes include the severance tax, the conservation tax, the emergency school tax, the ad valorem production tax and the ad valorem production equipment tax. After summarily dismissing the claims based on an alleged violation of the privileges and immunities clause of the United States Constitution, the trial court, after holding a non-jury trial, finds that the imposition of these five New Mexico taxes on non-Indian production from tribal oil and gas leases is preempted. That portion of the Reservation which is in New Mexico is unalloted and thus held by the United States in trust for the Ute Tribe. The sole economic activites on the New Mexico portion of the Reservation are grazing and oil and gas operations. The New Mexico Oil Conservation Division imposes its regulatory scheme on oil and gas operations on Tribal lands. The Tribe, however, does not allow the OCD to plug wells on Tribal lands. At the time of the litigation there are 186 active oil and gas wells on Tribal lands. The extant leases on the Tribal lands are largely held by two operators, Burlington Resources and XTO Energy. The leases were largely executed many years ago under the terms of the Indian Mineral Development Act. In addition to the leases, there are separate development agreements between the Tribe and private parties which also lead to the production of oil and gas from the Tribal lands. Before a Tribal lessee is entitled to drill a well it must get permission from the Bureau of Indian Affairs and the Tribe for the initial survey.