When white men created the Uintah-Ouray Indian Reservation, no one had an inkling the Utes had just been handed 3.8 million acres of lands rich in oil, natural gas and oil shale.
In fact, some now estimate there are more oil and gas reserves on the Ute reservation than almost any other single area in Utah - enough so each and every one of the 17,224 residents there should be economically secure.But there are precious few signs of economic prosperity on the reservation. Unemployment is running near 60 percent, oil companies are packing their tents and no economic development of any kind looms on the immediate horizon.
"A lot of companies have shifted their operations off the reservation," said Paul Andrews, Book Cliffs Resource Area manager for the Bureau of Land Management. And that directly affects tribal revenues.
Perry J. Baker, Bureau of Indian Affairs superintendent for the Uintah and Ouray Utes, has also noted the exodus of oil companies, citing the Utes' variable severance tax rate of 4 to 10 percent. That rate is in addition to a state-imposed severance tax.
"No question companies are worried about the double taxation issue," Baker said. "It's economics. It costs them less to drill off the reservation."
The downturn in oil and gas developments on the reservation comes at the same time the rest of the Uintah Basin is experiencing an economic revival fueled by natural gas explorations and reworking of unproductive oil wells.
Some exploration is occurring on the reservation. But not much.
"Stagnant is how I would describe things on the reservation right now," said Scott Bigler, executive director of the Duchesne Area Chamber of Commerce.
"Disastrous" is how Kent Stringham, a member of the state's Board of Oil, Gas and Mining, described it. "The tribe is holding up a lot of work. They just aren't functioning. They are not processing permits. There used to be more (oil and gas) permits on the reservation than off, but that's now changing."
More than double taxation, Baker believes industry of any kind is reluctant to invest in developments on the reservation while the Ute political situation is so volatile. Tribal elections are invariably followed by recall elections. Recently a judge declared void the results of yet another election and held the Tribal Election Committee in contempt of court.
"Success depends first and foremost on a stable tribal government," Baker said. "People on the outside need to know they will be treated fairly, that tribal leaders can be worked with."
And a stable tribal government is critical to develop a long-term master plan for oil and gas development strategy, taxation and tribal revenues, and an economy not exclusively dependent upon cyclical oil prices, Baker said. The tribe currently has no management plans.
"The reservation is deemed a risky place to do business," Baker said, "and economic development usually won't happen as long as that uncertainty exists."
"Oil companies are not great risk takers," Andrews added. "They crave stability and guaranteed profits."
And that makes not only the reservation, but the entire state, a risky place for oil companies to do business. David Baum, human resources manager for Pennzoil in Roosevelt, said Utah is perhaps the most expensive place anywhere in the United States to drill.
And not only is it expensive to get crude oil out of the ground, there's not that much there. In Kuwait, for example, a well will be closed down if it does not produce 8,000 barrels a day.
"In Utah we're often happy with 25 barrels a day," Stringham said, adding that the Uintah Basin's best wells produce 1,300 to 1,400 barrels a day. "And from there it declines."
Also a consideration is that the geology in eastern Utah is such that formations often require companies to drill 12,000 to 16,000 feet through hard rock that can take up to 90 days to penetrate. The same well can be drilled in Colorado in five to eight days.
Those factors combine to make drilling on the reservation, with the additional cost of tribal severance taxes, a marginal investment. The effects of the tax are becoming painfully obvious to tribal leaders who have watched tribal coffers steadily dwindle.
"There may be some indication attitudes toward the tax are changing," Baker said. But no one is willing to predict what the Ute Business Committee - the ruling body on the reservation - will do.
Baker is a strong advocate of a diversified economy on the reservation. But manufacturing ventures have traditionally failed, and the Utes are doing nothing to promote tourism.
"There seems to be a reluctance to have lots of outsiders traipsing around the reservation and scarring the land," he said. "They fear outsiders will destroy their resources, including their sacred areas."
Other opportunities also sit undeveloped. Some 10,000 acres of agricultural lands are idle, and nothing has been done to exploit the millions of acres of prime wildlife habitat. Water resources are another potential economic windfall, but beyond selling water to Roosevelt, no marketing plans are in place. There are also huge reserves of undeveloped tar sands.
Economic development on the reservation is expected to receive a significant shot in the arm if and when Congress passes funding for the Central Utah Project. Some $125 million of that money is earmarked for economic development there.
"The biggest issue is still oil, though," Baker said. "It's what people here relate to. They see oil and they see money."
Tomorrow: Oil shale and tar sands were once seen as the economic savior of eastern Utah. While alternative fuels remains a catch phrase, natural gas is the only alternative fuel being extracted from the Uintah Basin today. And the future for tar sands and oil shale continues to look bleak.