With the high court’s ruling, oil and gas drillers in the nation’s fourth largest oil-producing state suddenly find themselves operating within the Muscogee (Creek) Nation and four other tribal reservations.
About a quarter of Oklahoma’s recent oil and gas wells and around 60 percent of its refinery capacity now lie within the territory of five tribes — the Cherokee, Chickasaw, Choctaw, Creek and Seminole.
Perhaps more importantly, the network of pipelines pumping crude to and from Cushing, Okla. — a crucial oil terminal for the Keystone XL — spider-web across the redrawn reservation borders.
Instead of dealing with business-friendly regulators from the state of Oklahoma, oil producers may soon have to contend with both tribes and the federal government, which often manages land for Native Americans.
“The reality is that there’s something potentially that could be very detrimental to the oil and gas industry,” said Dewey Bartlett, a former Tulsa mayor who runs Keener Oil & Gas Company, a five-person oil and gas production and exploration firm with most of its wells now in Indian country.
With Americans driving and flying less during the viral outbreak, U.S. oil prices have dropped by a third since the start of the year. Oklahoma’s shale fields, where extraction costs are relatively high, are among the hardest hit during the pandemic. One of the state’s biggest energy firms, the fracking pioneer Chesapeake Energy, has already declared bankruptcy.
But the majority opinion writers acknowledge the ruling raises big questions over taxation and the enforcement of environmental rules across those 3 million acres — ones that may take years to settle.
“In reaching our conclusion about what the law demands of us today, we do not pretend to foretell the future and we proceed well aware of the potential for cost and conflict around jurisdictional boundaries, especially ones that have gone unappreciated for so long,” Gorsuch wrote in McGirt v. Oklahoma. “But it is unclear why pessimism should rule the day.”
Still, after having dealt with federal restrictions to protect an endangered beetle while drilling in Indian country, which could hold him up for months at a time, he says his big fear now is federal regulation.
“One of the things we were concerned about in the McGirt aftermath is that we, being Oklahoma producers, would lose the source of regulation from one place, the Oklahoma Corporation Commission, and start getting regulated by somebody from Washington,” he said.
Brook A. Simmons, head of the petroleum alliance, said he was concerned about retaining property rights for existing owners. “Our focus, really, is just making certain that our members continue to have a stable, predictable regulatory and tax environment,” he said.
On Thursday, Hunter and the five tribes came to an agreement for a legislative proposal to Congress that would give the Native American groups the right to collect taxes and grant them some authority over anything deemed to threaten the “welfare” of a tribe — a potential, though not certain, opening for environmental regulations.
The Petroleum Alliance of Oklahoma said it needed to study the agreement more before commenting.
Elizabeth Kronk Warner, dean of the University of Utah’s law school, said a major consequence for oil producers on the reservation may be two layers of taxes — one from the state and another from the tribes.
“The biggest impact there would likely be taxation,” she said.
And the Bureau of Indian Affairs and other federal agencies may end up getting new authority to run clean-air programs within tribal territory and, crucially, to renew right of way grants for existing pipelines. Seven major crude oil pipes cross into Creek territory.
Oklahoma’s Republicans in Congress are eager to pass a version of the proposal from Hunter and the tribes. But congressional Democrats, concerned about climate change, may not be if doing so denies Joe Biden, the party’s presumptive presidential nominee, leverage over the state’s oil and gas activity.
And even if President Trump wins a second term, environmentalists are increasingly joining with Native American groups to protest and sue to stop pipeline projects — most notably Dakota Access pipeline in North Dakota.
The Creek Nation is cautioning that no final decisions have been made about what they will ask of Congress. “There’s a lot of work to be done before we know what that looks like,” tribal spokesman Jason Salsman said.
But in the past, the Oklahoma tribes have asserted their rights over natural resources.
In 2011, the Chickasaw and Choctaw sued Oklahoma City for withdrawing water from Sardis Lake. They settled out of court.
Bartlett, the former Tulsa mayor, has had to shut in about a quarter of its 100 or so wells because of the drop in oil prices since the coronavirus pandemic began.
He said he worries investors may be less interested in working with drillers in eastern Oklahoma — especially when similar opportunities exist in the western half of the state and across the border in Texas.
“There would be that overlying concern that would be in addition to the investment itself in an industry that is somewhat risky already,” Bartlett said.
Already at least one company — Houston-based producer Alpha Energy Inc. — is warning investors it faces potential legal risks in its leasing of 3,400 acres in the state.
“This will be a very, very lengthy process,” Bartlett said. “Several decades, I would think.”
Source: Washington Post