Native Americans and Energy Projects – High Stakes in the Ground

June 2017, Vol. 244, No. 6

By Richard Nemec, Contributing Editor

While the average oil or natural gas industry worker today has little direct knowledge of the politically turbulent American period in the late 1960s and early ’70s, reminders of that period of social unrest have returned with a focus on pipelines and the environment.

In the process of rekindling the feel of a “national movement” aimed at fossil fuels rather than an unpopular war, U.S. Native American tribes have been in the forefront of civil disobedience, which has caught some energy companies off guard. This trend appears to be reversing decades of collaboration and cooperation between the indigenous American tribes and the oil and gas industry.

For hardcore environmental activists opposed to all forms of fossil fuel development, the strategy has been to target energy infrastructure projects and capital providing the throughput to get producers’ products to market.

Native American tribes have forged alliances with these activists, along with local communities, landowners and historic preservation associations. As a result, the industry finds growing opposition at the Federal Energy Regulatory Commission (FERC) to gas pipelines, for example, according to an analysis by ClearView Energy Partners LLC.

In the burgeoning Marcellus Shale gas play in Pennsylvania this spring anti-pipeline activists tore a page from the Native American playbook employed against the Dakota Access Pipeline (DAPL) oil project in North Dakota by launching a protest encampment in Lancaster County, along the construction route of the approved $3 billion Atlantic Sunrise gas pipeline.

Leaders of a countywide group opposing the pipeline earlier took part in the anti-DAPL protest encampment with the Standing Rock Sioux Tribe in south-central North Dakota. They took notes from their experience and applied them in using nonviolent, direct action protest tactics in Pennsylvania.

During an earnings conference call in late February and less than two weeks before Native Americans staged protests in Washington, D.C., Kelcy Warren, CEO of DAPL’s chief sponsor, Energy Transfer Partners (ETP), acknowledged the company underestimated the power of the protests, particularly social media, to perpetuate the opposition to a project that had received a green light from both state and federal regulators, and the federal courts in response to legal challenges from the Native American tribes.

Warren said social media allowed protesters to spread what he called “falsehoods” widely and quickly over the internet “and get away with it. There was no way we could defend ourselves and that was a mistake on my part.”

Meanwhile, the Standing Rock Sioux were planning to lead a high-profile march that would begin at the Army Corps of Engineers’ offices in Washington, D.C. and end at a rally on the Ellipse in the national mall within shouting distance of the White House.

In the waning months last year, as Native American opposition to DAPL was taking on a higher media and political profile, a House of Representatives’ Subcommittee on Indian, Insular and Alaska Native Affairs was hearing testimony in Santa Fe, NM, from three different tribes that welcome energy development, along with an economic development consultant and member of the research team at The Harvard Project on American Indian Economic Development, Eric C. Henson, who is a citizen of the Oklahoma-based Chickasaw Nation.

Noting that he grew up in one of the nation’s thriving oil-producing regions, the Permian Basin, Henson told the congressional committee members that increasingly Native American tribes are combating widespread “poverty and social distress” through various independent economic development programs. They are beginning to create what he calls “dynamic and self-sustaining economies,” but there is a dichotomy overall as there are still many tribes lagging behind.

While many tribes have begun “actively challenging century-long economic paradigms,” Henson told Congress, “a number still experience continued economic hardship, high unemployment, and rampant social and physical health challenges.” He emphasized there are “striking economic and social divergences” within the overall Native American population, which comprises 0.9% of U.S. citizens.

Some of the Harvard Project research amplifies poor socioeconomic conditions for even the tribes with rich natural resources that are far worse than national statistics. For example, in 2014 about 40% of the Crow and Navajo people were living in poverty, compared to a national proportion of 15% for all of the U.S. Yet west of the Mississippi, 20% of the oil/gas reserves, 30% of coal reserves and 50% of uranium reserves are found on Native American lands. These resources are estimated to be worth about $1.5 trillion, said Henson, who added that doesn’t include the vast renewable energy potential on some of those same indigenous peoples’ lands.

Legal and appraisal barriers among other federal government roadblocks to tribal resource development continue to be cited by Henson and others. An underlying message in the congressional testimony was that the federal government, with its trustee role over tribal lands, needs to be more of a facilitator, not an impediment, to tribal economic success.

“Tribes such as the Southern Ute are benefiting from energy development, but research has noted that some tribes that engage in the natural resource industries are often overly and unjustly burdened by the current system,” Henson said.

There are projects that could be developed, said Henson, a senior vice president with the national economic consulting firm Compass Lexecon in addition to the Harvard project research. “I think the potential is there, and there are some eye-popping statistics on what could be developed, but there are regulatory hurdles that the tribes need to jump through, even if they are interested in development.”

One lesson he learned working with Native American organizations over the past 20 years is that their views on just about every topic are incredibly diverse.

“They will have quite an alignment of interest on a particular issue [such as DAPL], but on other aspects of economic development or other economic issues, tribes that are seemingly similarly situated will still have very differing views,” he said, citing the Crow Tribe in Montana with vast coal resources that it aims to more fully develop but keeps running into opposition from the neighboring Northern Cheyenne Tribe.

In January 1992, the Navajo Nation administration under then-Chairman Peterson Zah issued the tribe’s own energy policy. It was formulated from energy specialists, environmentalists, economic development specialists, lawyers and political leaders of the Navajo Nation. The “Navajo Nation Energy Policy” observed that the Navajo were resource-rich, but it was neither obtaining proper value for its minerals nor, more importantly, participating in the energy industry as a business owner.

After 70 years of oil companies conducting business activities on tribal lands, the Navajo Nation formed its own corporation, the Navajo Nation Oil and Gas Co. (NNOGC, Inc. or tribal company) under the 1993 Navajo corporation code. This tribal corporation was created for the purpose of engaging in oil and gas production as a fully integrated, for-profit entity.

While Native American tribes seem to be reversing their history in the last half of the 20th century when they embraced joint fossil fuel projects as economic engines for their reservations, the tilt in the 21st century seems to be toward clean energy and closer ties to national environmental groups as opposed to major conventional energy companies. An example could be found in March in northern Minnesota at a “Sustainability Solutions Summit” and protest against an expansion of the Alberta Clipper crude oil pipeline from Canada.

The international pipeline that transports Alberta-based tar sands oil across the lake country in northern Minnesota traverses both the Leech Lake and Fond du Lac reservations. These are the Ojhibwe, or Chippewa, people, part of the indigenous population that for centuries has inhabited part of mid-North America in Canada and the U.S. around the Great Lakes. They rallied to protest a U.S. federal government draft supplemental environment impact statement (DSEIS) on the Clipper expansion.

Leading up to a State Department-hosted public meeting in Bemidji, MN, at the northern-most point of the Mississippi River and home to three surrounding Native American reservations, tribal and environmental groups held a sustainability summit to highlight clean energy technologies that the tribes and various northern Minnesota communities were pursuing in what they called “a transition off fossil fuels.” Participants eventually marched from the summit to the State Department public hearing.

Winona LaDuke, a founder and executive director of Honor the Earth, a Native-led environmental organization dating back to 1993, characterizes Alberta Clipper as having been expanded earlier (in 2015) by illegal means that violated federal law by using part of a new and still unpermitted separate project called the Line 3 replacement by Enbridge Energy Partners LP to move western Canadian crude oil to refineries in the Chicago area.

With the State Department in the regulatory driver’s seat, and former ExxonMobil CEO Rex Tillerson secretary of State, LaDuke was highly skeptical her side would get a fair airing. But what Tillerson might not realize, LaDuke said back in March, was “Standing Rock has sparked a historic resurgence of indigenous nations, and that we, as water protectors, are bringing that energy to the Great Lakes to fortify our resistance and stop the proposed Line 3 pipeline in its tracks.”

In the same timeframe of the first half of 2017, there are established tribal- and Department of Energy (DOE)-backed efforts to promote responsible energy projects that will benefit various Native American tribes. DOE and tribal interests backed an early May 2017 National Tribal Energy Summit on Tribal Energy Sovereignty and Strengthening Strategic Partnerships in Washington, D.C.

Part of the national summit included the Indian Country Energy and Infrastructure Working Group (ICEIWG) involving 14 tribes from 11 states that collaborates with DOE regularly on the agency’s surveys, analysis and recommendations related to programs and policy initiatives of DOE to fulfill its authority under Title V of the 2005 Energy Policy Act.

“ICEIWG aims to establish baseline information to guide policy and program prioritization and long-term strategy related to energy and infrastructure development on tribal lands while supporting the Office of Indian Energy,” according to DOE and the National Conference of State Legislatures. This effort underscores that, amid the din of high-profile tribal protests, there remains an ongoing energy economic development effort involving Native Americans.

The working group is a sounding board for the Office of Indian Energy, providing comments and recommendations to that part of DOE and its strategic roadmap for enhancing the tribes’ development of their natural resources. The multi-tribal group strives to “share information, transfer lessons-learned, and inform and be informed on current policy, procedures and industry partnership mechanisms,” a spokesperson for the National Conference of State Legislatures said.

In recent years, a point of focus has squarely been on the Bureau of Indian Affairs (BIA), an organization roundly criticized in a 2015 report by the Government Accountability Office (GAO) and The Harvard Project’s Henson, characterized as an understaffed and overburdened agency that has at times impeded tribes from capitalizing on their own resources.

The GAO was blunt in what it found as shortcomings at BIA and the fact that it had hurt energy development by Native Americans – a complex regulatory framework, limited tribal capital and infrastructure, and varying tribal capacity for economic development, adding that these shortcomings can increase costs and project development times.

The GAO documented many lost opportunities in the failure to get timely reviews and approvals needed for tribes to fulfill their energy potential. The GAO report noted the role of domestic energy production, including Indian resources, contribute “to the U.S. economy and national security, providing energy for transportation, manufacturing and residential use.”

While most of the recent domestic energy boom has come from non-Indian resources, the GAO report still held out the “significant potential” for future development that is part of Native American lands. One factor the congressional watchdog found as a deterrent and limiting response for more energy development is the tribal leaders’ general reluctance to sign energy resource agreements (ERA). With its checkered history of agreements with the federal government, it is understandable that this is another barrier needing to be lowered or eliminated.

The Interior Department’s old Indian Energy and Economic Development (IEED) unit from 2007-13 provided energy development help to 25 tribes, but GAO’s report found that “the effectiveness of the [IEED] grants to move tribes closer to demonstrating that they have the capacity to enter into ERA contracts is unknown.” Though federal protocols call for the agencies keeping close score, the GAO found that the agencies have failed to effectively measure actual results against expectations.

Good business models seem to be in short supply but there are individuals and organizations that can offer a framework for future success stories. Henson is quick to point out that much of his consulting experience has involved working with tribes, such as the Navajo and Crow, with substantial energy resources. And the Harvard Project maintains ongoing programs designed to better understand what makes tribal economies prosper.

Research has verified that institutions, culture and sovereignty all matter greatly for any Native American enterprise. When tribal law prevails and politics takes a backseat to efficient administrative processes, the governing institutions can then support sustained economic development with the right “cultural match.”

For Henson and his Harvard Project colleagues this means economic development pursuits must be viewed as legitimate among others.
What ultimately results is self-determination over the design, ownership, accountability and leadership issues that foster successful development.

“It has become clear that tribes must have autonomy in order to foster institutions that are a cultural match for their societies,” Henson said. “Successful tribal governments all exhibit effective institutions paired with a cultural match.”

The evidence is slim regarding oil and gas companies reaching out to Native American tribes or showing more interest in the tribal resource potential. Henson has seen some antidotal evidence of the E&Ps reaching out, mostly oil companies.

It also varies with tribes. There is still a question about trust on both sides. “Individuals still matter; if there is someone at the tribe in charge of liaison with the oil/gas industry, and there are contract administrators who have developed a good working relationship, that can give you a different result than the usual stereotype that both sides are a little leery of each other,” Henson said.

A clearer issue involves the federal government and its uneven history with the tribes cannot be ignored. The GAO report has codified the negative results of this dysfunctional relationship. Congress may need to take some positive action that unbinds the hands of the nation’s original citizens.

When a Southern Ute representative, Mike Olguin, testified in the House subcommittee hearing in Santa Fe last year, he talked in a context in which it was recognized that it is over 10 times harder to obtain an energy development project permit on Indian lands than on non-reservation sites. Four different federal agencies are involved in a permit on a reservation.

Olguin urged congressional members to grant greater authority to tribes that are “willing and able” to pursue energy development on tribal lands. “In some instances, the best way for the U.S. to uphold its trust responsibility would be to step aside.”

Richard Nemec is P&GJ’s West Coast contributor in Los Angeles. He can be reached at: rnemec@ca.rr.com

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