"This is the first move they've made," said Duchesne County Commission Chairman Larry Ross of the Ute Tribe's proposal to impose a 10 percent severance tax on oil and gas production on parts of their expanded reservation.
Although officials report the roots of cooperation between Indians and non-Indians are growing in the dry, Uintah Basin soil, some say fears the tribe may still abuse its expanded powers are becoming manifest.For example, officials cite the proposed severance tax on oil, gas and other minerals taken from trust lands on the tribe's 4 million acre reservation - a move tribal officials argue is necessary for the tribe's survival.
Two recent U.S. Supreme Court decisions unquestionably give Indian tribes the right to impose severance taxes on their reservations. And the top court was especially firm in expanding the Ute's Uintah and Ouray Reservations by an astounding 3 million acres in 1986.
Utes rely heavily on royalty income from the 1,000 barrels of oil pumped daily from trust lands to fund their 51-department government. That revenue has dropped significantly since oil prices plummeted from over $20 per barrel to $13.
Looking at the "bottom line," Lester Cha-poose, chairman of the tribe's ruling Business Committee, said the 10 percent severance tax will replenish depleted tribal coffers.
Already, the state of Utah slaps oil and gas producers with a 4 percent severance tax, reaping $4 million dollars from the trust lands in eastern Utah the Utes propose to tax, the state Tax Commission said.
Oil producers call the Ute and state taxes "double taxation" and join non-Indian government officials in saying the tax represents the beginning of the end of the Uintah Basin's oil industry.
Is the proposal, as Ross said, the tribe's first overt move? Is the tribe taking its first baby steps toward self-sufficiency after wisely remaining passive for two years after the decision awarding them an expanded tax base?
Tribal officials say their proposal is not calculated or strategically timed to avoid controversy. Instead, the move was motivated by economic forces that demanded the tribe seek a solution to a fiscal crisis.
Because of fallen oil prices, the tribe needs $5 million more annually to support the services it provides to its members, Chapoose said. Conveniently, the severance tax would create the same amount in revenues.
"It (a severance tax) has been talked about over the years, and we've always known we had the authority to tax," said Business Committee member Maxine Natchees. "What prompted it now is the economics of the tribe."
The tribe is seeking other ways to strengthen its fiscal condition, sinking economic development dollars into ways of diversifying their economy by attracting manufacturing to the reservation, Natchees said.
"But until that investment pays off, we're going to have a declining economy that could be bolstered by the severance tax," she said.
Others, however, say the proposed tax is a lose-lose proposition for everyone in the Uintah Basin.
At a public hearing called Sept. 29 in an auditorium at the tribe's headquarters in Bottle Hollow, Duchesne County, oil producers told the tribe the tax would devastate oil production and the area's economy would follow suit.
Bennie Sinclair, vice president of production for Penzoil Oil Co., told the tribal Business Committee the tax spells disaster for marginally producing wells in the Uintah Basin.
If Penzoil wells suffer under the tax, Sinclair said, oil royalty revenue to the tribe would suffer as would those closely affiliated with the oil economy in eastern Utah. That includes nearly everyone.
"We all lose - the tribe, Penzoil, royalty owners, the citizens of northeast Utah," he said.
After Sinclair's presentation at the hearing, complete with color graphs and a cascade of facts and figures, Chapoose said he was unimpressed with the negative forecasts.
"I'm an optimist when it comes to things like that," the chairman said, brushing off doomsaying by asserting oil producers were offering only worst case scenarios.