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

摘要

For a discussion of the facts, see the case summary for the District Court opinion supra. The Tenth Circuit distills the lengthy findings of fact made by the District Court and disagrees with the District Court's characterization of OCD activities on Tribal lands as being de minimis in nature. The District Court determined that the five New Mexico taxes imposed upon non-Indians for oil and gas operations on Tribal lands was preempted. Held: reversed and remand. The Tenth Circuit notes that the District Court properly identified the relevant cases for dealing with the preemption issue as Cotton Petroleum, Bracker and Ramah. It feels that all three apply a balancing test to determine whether or not a particular state law may be applied to an Indian reservation or to Tribal members. There is a strong federal statutory and judicial policy in favor of upholding Tribal sovereignty. But Tribal sovereignty is not a sufficient basis, standing alone, to find that state law has been preempted. Relying heavily on Cotton Petroleum, a case dealing with the same 5 New Mexico taxes, the court makes what it calls the required "particularized inquiry" to determine if preemption is to be found. The three most important factors in this inquiry are: "(1) the extent of the federal and tribal regulations governing the taxed activity; (2) whether the "economic burden" of the tax falls on the tribe or the non-Indian individual or entity; and (3) the extent of the state interest justifying the imposition of the taxes." Finding that in Bracker the extent of federal regulation was substantially greater than it is in this case, along with concluding that there is little federal regulatory or taxing interest in oil and gas production activities, the Tenth Circuit falls back on Cotton Petroleum to conclude that the first factor favors a finding of non-preemption. While Cotton Petroleum was dealing with leases under the Indian Mineral Leasing Act (IMLA).