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Indian Oil: A Very Different After-Thanksgiving Sale

A long-awaited oil land lease will bring a windfall to heirs of the Trail of Tears.

This year, the rush for the after-Thanksgiving sale takes on new meaning for more than a thousand American Indians in southwestern Oklahoma. After two years, the Anadarko Agency, a regional office of the Bureau of Indian Affairs, in conjunction with the Department of the Interior, will hold the long-awaited and largest-ever sale of oil and gas mining leases of tribal land.

Anadarko Agency spokesperson Leander Eckiwaudah said the auction this Dec. 2 through 4 will see activity on a record number of tracts — “at least 1,536, and some are still being added at the last minute.” Some of the tracts have been leased before, but those contracts expired when technology or oil prices meant the petroleum couldn’t be extracted economically.

Each of the tracts listed is expected to be leased, which is good economic news for the tribes. Once the lease sale is accepted by the individual Indian owners and tribal officials, each owner will receive a one-time, tax-free bonus lease payment of $200 to $700 an acre. When production commences, the owners will then receive royalty checks equal to 20 percent of that production.

Eckiwaudah said his office has been the oversight agency for lease sale management as far back as he can remember. “My mom worked here also, back in the ’70s, and many of the wells set in at that time are still producing today, which means those owners are still getting royalty checks.”

However, without an annual lease sales auction — particularly in an era of record-high oil and gas prices — tribal owners cannot benefit, and tribes have watched with dismay as record-high oil prices have evaporated this fall.

The BIA has cited overwork, short staffing and a lack of experts for the delays in leasing tribal lands in Oklahoma and throughout the West — rationales that earned it a blistering rebuke from the chairman of the U.S. Senate Committee on Indian Affairs. “Through this investigation and hearings I have chaired, it has become clear that the Interior Department and the BIA are not only asleep at the wheel when it comes to producing energy on tribal lands, but they have no plan to fix the problems that exist,” North Dakota’s Democratic Sen. Byron Dorgan said in June.

Obtaining drilling lease and mineral permits on tribal land is a nightmarish bureaucratic exercise: Paperwork and regulation that involves multiple federal agencies, tribal governance, state reviews and individual Indian ownership issues are made more complex because Indian land is not actually by individuals but held in federal trust for the group as granted in allotments or treaties often more than a hundred years ago.

The Back Story
Beginning in 1830 with the Indian Removal Act, American Indians across the southeastern U.S. and later the whole continental nation were forcibly removed from their ancestral lands and resettled in Indian Territory, much of which later became the state of Oklahoma. The region wasn’t particularly forgiving, especially for nations used to the abundance of the Southeast, and its lack of known minerals and unattractiveness to whites made it a handy place for relocating the Indians.

The devastation, hardship and death that resulted from this coerced move to the very different environment of the Southern Plains was called the Trail of Tears by the Five Civilized Tribes (comprising the Cherokee, Chickasaw, Choctaw, Creek and Seminole nations), who were among the first to be marched there. Nations from the Plains, the Intermountain West and the Midwest — such as the Cheyenne-Arapaho, Washita, Comanche, Apache, Fort Sill Apache, Kiowa, Caddo, Kaw, Tonkawa, Pawnee, Absentee Shawnee, Pottawatomie, Iowa, Kickapoo, Delaware, Otoe-Missouria, Ponca, Quapaw and Osage — also were pushed into the territory.

“I think the government was hoping that so many diverse tribes all crowded into one place would be a cauldron of adversity and we would kill each other off,” reflected Marlene Echohawk, administrator of the Behavioral Health Program at Indian Health Services in Washington, D.C., who was originally raised on Oklahoma tribal land. “But we fell in love with each other, (we) intermarried, and our ranks grew, not dwindled.”

Through various treaties with individual tribes and the General Allotment Act of 1887, Eckiwaudah said, the federal government parceled out Oklahoma Territory, with each Indian person receiving 120 to 160 acres. The size was meant to encourage farming and assimilation, not drilling. Naturally occurring petroleum seeps called “medicine springs” were known to indigenous people before Europeans arrived, and oil was struck in the Cherokee Nation in 1859. Several attempts to make a commercial go of oil from Indian lands failed in subsequent years, but the commercial possibilities of Oklahoma crude wasn’t fully recognized until the first paying well was drilled — on Cherokee land in 1897.

Meanwhile, these land allotments never changed or grew as families increased; Echohawk said that lands originally allotted to one person may now be shared today by more than 200 people, and each plot retains the same numbered name originally registered with the federal government.

The Five Civilized Tribes (so called because they had a written language) may negotiate directly with the oil and gas companies, but the interests of the other tribes, sometimes called the “non-Civilized Tribes,” are managed by a BIA regional office such as Eckiwaudah’s Anadarko Agency. In either case, when land is offered for lease, the process is complicated and lengthy.

Managing the Details
“For anyone not brought up in Oklahoma, the whole enterprise of leasing Indian land is beyond baffling,” said Jennifer Krieg, a principal with Oklahoma City-based Reagan Smith Energy Solutions Inc., a company of brokers who manage the lease sale process for mining, gas and oil companies. She said it was founded to provide a turnkey transaction for tribes and investors, ensuring the protocols and procedures are followed to the letter.

According to both Eckiwaudah and Krieg, the services on behalf of the investors provide the tribes with a higher level of equitable land management, ensuring land and environment are protected and that heirs get a fair share.

Oklahoma, especially the western regions, Krieg said, “is a hotbed of oil and gas production; the entire state is what is termed a ‘forced pooling state.’” In other words, “If someone wants to drill on your land, you can’t stop them, and if you do, the land management office can intervene.” Of course, the landowner will negotiate for royalties with the mineral companies, so there’s
at least some payoff.

“But, if you want to drill on Indian-owned lands, it’s a different story — being a sovereign nation, they are exempt from the forced pooling statutes,” Krieg explained. Indian lands can be leased through regularly held auctions like the one next week. And while there is no guarantee a lease will produce a working well, Krieg said that “almost anyplace you sink a drill bit around here will come up with something,” beginning a stream of income for the land’s listed heirs.

Krieg summarized the stream: “The average land lease is between $200 and $700 an acre — this is called the bonus payment, a one-time payment that allows an investor three years to develop the land. So, if a tract of 160 acres realizes a lease sale price of $500 an acre, those heirs would realize a bonus payment of $80,000. If there are few heirs it can be a substantial payment, but if there are hundreds it can be just a few dollars for each.”

To protect the lands, mining companies must comply with the National Environmental Policy Act, which covers how such federal agencies as the BIA comply with environmental needs and regulations. After a lease agreement is finalized — it may take six months to a year to obtain all requisite heirs’ signatures and tribal approvals — the 100-page application to drill is filed with the Bureau of Land Management, which administers NEPA.

“It’s our job to make sure that no violations or missteps occur that would hinder the heirs from getting their payments or the mining companies from successfully reaching production,” Eckiwaudah said.

Krieg added, “This includes environmental, wildlife and archeological protections. If there is a wetland, we get a wetland delineation plan; we make sure there is a spill-prevention plan and a cleanup plan should one (a spill) occur (and) a reforestation plan if trees need to be cut down.” Equipment must also blend into the natural setting and be painted green or brown.

Archeologists assess the presence of artifacts, such as sod homes and religious grounds and burial sites. The plan must also comply with the Surface Damage Act to preserve the integrity of the land. Today’s new technologies that allow for drilling to occur at angles and parallel to the ground rather than straight down can cause less disturbance, keeping surfaces more intact.

Moving Up to the Convention Center
Next week’s sale will be run like any other auction with an audience of anxious land heirs, 30 to 40 gas and oil companies bidding for tracts, brokers representing clients and “a lot of curiosity seekers, considering the new venue,” Krieg said. The auction has been moved from the less-than-ideal cramped Anadarko Agency space to the Cox Convention Center in Oklahoma City, which will be showcasing a major wind energy conference down the hall.

So, what’s the projected take for this special after-Thanksgiving sale? With more than 1,500 tracts averaging roughly 50 acres each and auctioning at a minimum of $300 an acre, the sale could potentially bring more than $22 million.

Echohawk said the lease sales are extremely beneficial to the tribes and, in her case, provided a very personal benefit. “It was through lease sales that my grandmother put me through college,” she said, and as an heir, Echohawk continues to receive royalty checks.

“Indians have to keep finding new ways to generate income and do things that other groups can’t, and managing land is one way to bring in millions of dollars.”

Author’s note: The current stated and preferred attribution of Indians of North America is “Indian” and specific tribal affiliation (“Comanche,” “Delaware,” “Seminole,” etc.) rather than “Native American.” The terms “Civilized” and “non-Civilized/Wild” are proper nomenclature and customarily used in tribal land lease transactions.

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