The Supreme Court ruled Tuesday that states may tax companies for oil and gas taken from Indian reservations.
Voting 6-3, the justices handed Western states an important victory in upholding a New Mexico tax on oil and gas taken from the Jicarilla Apache reservation there.The court said the state levy does not trample on Indian rights and is not unfair to a petroleum company - even though the company must pay taxes to the state and the tribe.
The court rejected arguments that the state tax interferes with tribal economic development by prompting producers to look off Indian reservations for mineral deposits.
New Mexico officials told the court the dispute is of great concern in the West. They said there are more than 150 cases of companies with deposits on Indian land protesting such double taxation in Arizona, New Mexico, Montana and Utah.
Justice John Paul Stevens, writing for the court, said Congress has not specifically pre-empted the power of states to tax oil and gas on Indian lands.
"Any impairment to the federal policy favoring the exploitation of on-reservation oil and gas resources by Indian tribes . . . is simply too indirect and too insubstantial to support" a claim the state tax is pre-empted, Stevens said. Stevens rejected arguments by Cotton Petroleum Inc., which has a lease with the Apaches for oil and gas on the reservation, that it is subject to unfair double taxation.
"It is, of course, true that the total taxes paid by Cotton are higher than those paid by off-reservation producers," he said. "But neither the state nor the tribe imposes a discriminatory tax. The burdensome consequence is entirely attributable to the fact that the leases are located in an area where two governmental entities share jurisdiction."
Stevens also noted that New Mexico provides services to Cotton Petroleum on the reservation.
Finally, Stevens rejected an assertion that the Apache tribe is a "state" and therefore Cotton Petroleum is subject to multiple state taxation.
Cotton Petroleum challenged taxes on oil and gas taken from some 15,000 acres of land on the Jicarilla Apache reservation.
The company pays taxes to the tribe amounting to about 6 percent of its prpoduction, and New Mexico levies five taxes on the company amounting to 8 percent of its production.
Cotton Petroleum noted that oil and gas producers in the state with deposits taken from non-Indian land only pay 8 percent in royalties.
In other action, the court:
- Upheld a 1986 federal law imposing "safety user fees" on pipeline companies that transport natural gas and hazardous liquids.
The court reversed the ruling of a federal magistrate in Oklahoma that the law, which allows the secretary of transportation to impose user fees to pay for pipeline safety programs, unconstitutionally gives the executive branch too much of Congress' power to impose taxes.
- Tossed out a dispute over the federal government's power to ban newspapers from publishing lists of winners in privately run lotteries.
The justices ruled 6-3 that a controversy from Minnesota has become moot because the government no longer intends to enforce the ban.
The Indian reservations case is Cotton Petroleum vs. New Mexico, 87-1327.