McGirt decision could upend Oklahoma’s regulation, taxes
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Published: 07-Aug-2020

A recent U.S. Supreme Court ruling that reestablished Indian reservations in Oklahoma is creating broad uncertainty and threatens to result in regulatory chaos that will drive businesses away from the state, according to state leaders.

“Businesses need certainty, and if we want businesses to locate in Oklahoma, they have to know what the rules are to locate here,” said Gov. Kevin Stitt.
“When there is uncertainty with regard to commerce and economic development, that’s not good for anybody,” said Attorney General Mike Hunter.

The similarity of those comments, made at separate press conferences in recent days, are notable because Stitt and Hunter have often been at odds, particularly over tribal issues. But both say the state faces potentially severe fallout from the court’s ruling in the 'McGirt v. Oklahoma' case.

In its ruling, the U.S. Supreme Court found certain crimes involving American Indians on tribal land in Oklahoma must be prosecuted in federal, not state, court. While the decision directly affected land held by the Muscogee (Creek) Nation, it is expected also to apply to the Cherokee, Chickasaw, Choctaw, and Seminole nations. 
The cumulative effect of the ruling could impact nearly half the state of Oklahoma, where 1.8 million people reside, including the city of Tulsa.

Because the McGirt decision declared the Muscogee (Creek) Nation’s reservation boundaries were never formally disestablished and that territory remains “Indian country,” the decision is expected to also expand tribal government authority in a wide range of areas, including regulation and taxation.
Exactly how tribal government leaders plan to respond to their newfound power remains unclear. The Muscogee (Creek) Nation did not respond when asked how the tribe plans to administer its police power over lower-level crimes involving tribal citizens committed within the tribe’s reservation boundaries, which include much of Tulsa.

While tribal officials have provided few specifics, some have indicated they hold an expansive view of their newfound authority.

“We are looking at ways to expand our sovereignty with the McGirt decision while balancing meeting the needs of our citizens and the communities in which they reside,” Chief Gary Batton of the Choctaw Nation of Oklahoma said in a July 17 statement (https://www.choctawnation.com/news-events/press-media/tribal-leaders-stand-firm-sovereignty-helping-chart-way-forward-state). 

“Our commitment is to strengthen not weaken our tribal hard-earned rights to self-government.”

Stitt has formed the Oklahoma Commission on Cooperative Sovereignty to study the potential challenges created by the McGirt ruling. Stitt notes the ruling could affect everything from police power to Department of Human Services (DHS) authority to transportation issues.

“I did an executive order and I told every state agency they need to report what that means for their state agency, what it means for DHS by going in and removing kids from an abusive situation on a reservation because it’s considered a reservation now,” Stitt said. “What does it mean for tax policy? So we have the tax folks letting us know. What does it mean for the Corporation Commission? Can they regulate how much the weight limits can be on vehicles driving now on our roads if they’re a reservation? There’s a lot of uncertainty, there’s a lot of questions that have to be solved, and we’re in the fact-finding process right now.”

Benjamin Lepak, a legal fellow at the 1889 Institute, said the court’s ruling creates an opportunity for legal challenges that could dramatically alter state government and also increase the costs of business for Oklahoma companies.

“Just imagine the state revenue implications,” Lepak said. “If you’ve got Indians on tribal lands saying they’re exempt from, say, the state income tax, and at the same time you have the tribes levying tribal taxes on non-Indian businesses or individuals in ‘Indian country,’ it’s kind of a double-whammy. And taxes are just one narrow problem set that may play out in litigation. You could apply similar arguments to countless aspects of life and come up with scenarios that at a minimum — even if they ultimately end up in the same place as before McGirt — there’s a process between now and then and it’s likely expensive and disruptive.”

Hunter also predicts the “civil aspects of McGirt are going to be a subject of litigation that could have a checkerboard sort of consequence over time.”
Even so, he downplayed some concerns about the ruling.
“McGirt does not affect real property ownership. It does not affect oil-and-gas interests. It does not affect existing contracts,” Hunter said. “In order to subject yourself to tribal jurisdiction, there has to be consent. You have to have an agreement that’s in the nature of a contract where you’re going to do business with a tribe and you’re therefore consenting to jurisdiction.”

The attorney general said tribal citizens living outside of tribally owned lands would not be exempted from paying taxes.
“You have the same responsibilities to the state, in our opinion, as non-Indians,” Hunter said.
However, while Hunter’s statements may reflect the legal arguments the state will make, there’s no certainty those arguments will prevail in court. And there have already been indications some tribal entities disagree with Hunter’s assessment.

One notable example is the Seminole Nation’s issuance of letters (https://www.ocpathink.org/uploads/assets/pdfs/Seminole-letter.pdf) to oil and gas producers in 2018 that sought payment of fees and tribal taxes.

That document, issued by the Seminole Nation Business and Corporate Regulatory Commission (BCR), stated, “This letter is intended to provide notice to all operators in our area that to actively produce oil and/or gas within our jurisdictional area an Operator’s Permit issued by the Seminole Nation is required. If you have an active oil and gas lease in our jurisdictional area a Lessee Permit is required for each lease containing all or a portion of restricted interest. If you are actively producing oil and/or gas within our jurisdictional area you are required to pay a severance fee of 8% of the gross market value and file a monthly remittance report with the BCR.”

While that letter was issued prior to the court’s McGirt ruling, it occurred as McGirt-style cases were being litigated, and the letter was seen by many as a signal of how the Seminole Nation would proceed if the court gave a ruling favorable to its interests.

Legal experts have also warned that business interests, particularly in the energy industry in Oklahoma, face significant potential increases in regulatory costs and complexity.

A recent column (https://www.jdsupra.com/legalnews/oklahoma-oil-and-gas-business-braces-47615/) by Adam Dinnell and Andrew Hicks, attorneys with the Schiffer Hicks Johnson law firm, warned those in the oil and gas industry that the McGirt ruling “raises the specter of added uncertainty, dueling requirements, and the prospect of increased litigation.”

Dinnell and Hicks said the Oklahoma Corporation Commission’s traditional role as primary oil and gas regulator “could be supplanted in eastern Oklahoma” and that tribes could impose their own wildlife protection clauses, land-use restrictions, and prohibitions against water contamination, as well as implement their own oil and gas permitting processes, drilling plan requirements, and zoning restrictions.

Dinnell and Hicks also note that under the federal Indian Mineral Leasing Act (IMLA) and Indian Mineral Development Act (IMDA), the Secretary of the Interior has ultimate authority to approve and disapprove mineral leases or energy development contracts involving certain Indian lands.

“As a result, oil and gas producers operating in eastern Oklahoma should prepare to face tribal arguments that their leasehold rights are invalid because they were never approved under IMLA or IMDA,” Dinnell and Hicks write.

The attorneys also note that “oil and gas business in eastern Oklahoma could see tribes seeking to impose their own taxes on non-Indian oil and gas lessees” and that the Oklahoma government “will likely be unable to tax the sale of oil and gas by and of the affected tribes or their members within the area identified as reservation.”

“As a result, oil and gas companies owned by a tribe or tribal members could have a distinct advantage in the post-McGirt landscape, potentially incentivizing the sale of oil and gas operations to tribes for tax advantages,” Dinnell and Hicks write.

While differing on the details, most officials agree Oklahoma is entering uncharted territory.
“There’s really no reservation like this in the country,” Hunter said, “where you have Indians and non-Indians basically inculcated, doing business with each other, living across the street from each other in a way that we’ve existed for 113 years.”

NOTE: Ray Carter is a veteran journalist now working as director of the Center for Independent Journalism, based at the Oklahoma Council of Public Affairs (OCPA). This news story first appeared here:  http://www.ocpathink.org/post/mcgirt-decision-could-upend-regulations-taxes . This storyis reposted here with permission. Carter’s stories often are posted at the website for CapitolBeatOK.com -- an independent, locally-operated and non-partisan news organization – and more often in morning aggregation shared on our Facebook page. Patrick B. McGuigan, founder of CapitolBeatOK, selected the photographs accompanying this story. 

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