The state of Utah and the Ute Indian tribe should meet at the bargaining table to reach an agreement appeasing Uintah Basin oil producers complaining of "double taxation" on oil production, the Duchesne County attorney said.
But the leader of the Ute tribe, which is proposing a 10 percent severance tax on oil taken from reservation trust lands, said negotiations won't work because Gov. Norm Bangerter is unresponsive to Indian needs.The Ute's 10 percent tax, which could take ef-fect Nov. 1, would be a second tax on oil producers, who already pay a 4 percent state severance tax on oil they extract from eastern Utah's Ute Indian trust land.
Oil producers and non-Indian government officials call that a double whammy that would close oil wells and put a dent in an eastern Utah economy already battered by oil prices plummeting from over $20 per barrel to $13.
But Duchesne County Attorney Herb Gillespie said the state should meet with the tribe to find a middle ground, allowing the state and tribe to tax oil production at a reasonable level and share the harvest.
Gillespie suggested the tribe and state share the state's current 4 percent severance tax. Utah receives $4 million in revenues from oil taken from Ute trust lands, the state Tax Commission said.
That means both entities would take home $2 million each, far short of the $5 million in projected revenue tribal officials said they want from their severance tax.
Nevertheless, Gillespie said splitting the revenue is cheaper than continuing litigation over the issue. The tribe postponed a federal lawsuit challenging the state's authority to tax oil on Indian land.
The governor's office will study the proposal, said Dep. Lt. Gov. Dave Hansen, who represented the governor at a hearing on the severance tax Thursday at tribal headquarters in Bottle Hollow, Duchesne County.
"The administration is going to take the course of action that is going to be best for the entire area, the Indians and the non-Indians," Hansen said.
Lester Chapoose, chairman of the Ute's ruling Business Committee, said negotiations won't work because Bangerter maintains a poor dialogue with the Utes.
"I don't know that (negotiations) would work. I have not seen the governor of Utah on the reservation to see for himself the needs of the Indians since Gov. Cal Rampton," he said.
"I have a small beef, in that respect," he added.
Responding to Chapoose, Hansen said he didn't want to turn the discussion into a "personality situation."
"This administration has responded when the Ute Indian tribe has made a request," he said.
The double taxation issue is complicated by a case pending before the U.S. Supreme Court. Cottonwood Petroleum vs. the State of New Mexico challenges the state's rights to tax oil taken from Indian trust lands.
The court could rule that states can't impose severance taxes on trust lands, or it could decide that states and tribes can both tax an apportioned amount.
At the public hearing Thursday, several oil producers suggested implementation of the Ute tax be postponed until after the court decides on the Cottonwood case, which officials said could be this spring.