Nearly every aspect of Indian energy development is controlled at some level by the federal government. The Secretary of the Interior must review and authorize all leases and agreements. Federal agencies also collect royalty payments on behalf of tribes and individual Indians and then redistribute them as royalty disbursements to Indian mineral owners.

The government’s authority over Indian lands traces its roots to the federal trusteeship established in the early nineteenth century. In 1831, Chief Justice John Marshall described tribes as “nations within a nation, ” unable to negotiate treaties with foreign nations but implying that they retained the power to govern themselves.

Marshall, however, went on to describe the relationship between tribes and the United States as “that of a ward to his guardian. ”10 From this conception, the federal government became the trustee of Indian lands. The government holds the legal title to all Indian lands and is required to manage those lands for the benefit of all Indians.

Underlying the federal trust responsibility is the notion that tribes are incapable of managing their own lands. For much of the twentieth century, tribes had little or no control over their energy resources. Royalties and other payments were historically set by the Bureau of Indian Affairs. The agency consistently undervalued Indian resources and, by all accounts, did a poor job of negotiating and collecting royalty payments. 11 In 1977, the Indian Policy Review Commission concluded that “the leases negotiated on behalf of Indians are among the poorest agreements ever made.”

In practice, the federal trusteeship of Indian lands limits opportunities for tribal resource development and self-determination. Although tribes have gradually been granted more control over energy development decisions on their reservations, tribes still must acquire approval for every lease, a process that is notoriously slow and cumbersome. Many investors and energy companies simply avoid Indian lands altogether. In addition, Indians themselves are often skeptical of energy development due to past abuses and mismanagement by the government.

A complex bureaucracy raises the cost of energy development on Indian lands

On Indian lands, companies must go through at least four federal agencies and 49 steps to acquire a permit for energy development, compared to as few as four steps off reservations. The effect of this complicated bureaucracy is to raise the cost of entering into resource development agreements with tribes or individual Indians.