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Water agency dealt setback in challenge to Bureau of Indian Affairs rule

Filed Under: Business | Law | National
More on: 9th circuit, agua caliente, bia, california, consultation, economic development, mike black, taxation

Mike Black, the acting Assistant Secretary for Indian Affairs, addresses the winter session of the National Congress of American Indians in Washington, D.C., on February 14, 2017. Photo by Indianz.Com / Available for use under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

It's been a bad day in court for a local government entity in southern California.

First, the Desert Water Agency lost a huge dispute with the Agua Caliente Band of Cahuilla Indians. By a unanimous vote, a three-judge panel of the 9th Circuit Court of Appeals held that the tribe is entitled to groundwater on its reservation.

But that wasn't all. In a second decision, a different panel of 9th Circuit judges ruled that the agency cannot sue the Bureau of Indian Affairs for merely updating a leasing rule.

The rule, which was finalized during the Obama administration, confirms that state and local entities like Desert Water cannot impose taxes on Indian lands. But, in and of itself, it doesn't actually force the agency to change how it does business, the court determined.

"As far as we can tell, DWA makes a single argument as to why it would have standing to challenge § 162.017 even if it has no preemptive effect," Judge Diarmuid F. O’Scannlain wrote for the majority, referring to the section of the U.S. Code that implements the updated rule.

"The argument seems to be that § 162.017 injures DWA because it encourages leaseholders to object to paying DWA’s charges," O’Scannlain continued. "And, the theory appears to be, an order declaring the regulation invalid would redress such injury because then the leaseholders would pay DWA’s charges without objection."

"We think this theory is inadequate," the judge concluded.

Indianz.Com SoundCloud: 9th Circuit Court of Appeals Oral Arguments in Desert Water Agency v. U.S. Dept. of the Interior August 3, 2016

The court did acknowledge that the agency could end up in court if a leaseholder refuses to pay taxes for activities on Indian lands. Apparently, one leaseholder asked for reimbursement for paying such taxes.

But the agency denied the claim and the leaseholder isn't a part of the lawsuit, the court noted. Therefore, Desert Water has not suffered an injury that can be traced to the BIA, O’Scannlain wrote.

Tribes welcomed the December 2012 leasing rule at issue because it addresses a long-standing issue that affect their economies. States and local agencies have long asserted a right to impose taxes on Indian lands but the revenues that are generated almost never make it back to reservation communities.

The amounts that are bypassing tribes can be staggering. As part of the lawsuit, Desert Water claimed it could lose $7 million a year if leaseholders refused to pay taxes for activities on Indian lands.

Complaints about the situation have prompted the BIA to move forward with another rule. An update to the Indian Trader Regulations aims to restore balance by ensuring tribes benefit from economic activities on their lands.

"Dual taxation of traders and activities conducted by traders and purchasers can impede a tribe's ability to attract investment to Indian lands where such investment and participation are critical to the vitality of tribal economies," the BIA said in December when it initiated the rule-making process. "Tribal communities continue to struggle with unmet needs, such as in their schools and housing, as well as economic development, to name a few. Moreover, beyond the operation of their governments, tribes continually pursue funding for infrastructure, roads, dams, irrigation systems and water delivery."

Even though the process began late in the Obama era, the Trump administration gave the BIA the go-ahead to move forward with the update. A series of consultations with tribes concludes next week.

"It's an effort to modernize the implementation of the Indian Trader statutes, consistent with federal policies of self-determination and self-governance," Mike Black, a BIA employee who is serving as the acting Assistant Secretary for Indian Affairs, said at the winter session of the National Congress of American Indians last month. He noted that the regulation hasn't been updated in decades.

Turtle Talk has posted documents from the case, Desert Water Agency v. Dept. of the Interior.

9th Circuit Court of Appeals Decision:
Desert Water Agency v. Dept. of the Interior (March 7, 2017)

Federal Register Notices:
Residential, Business, and Wind and Solar Resource Leases on Indian Land (December 5, 2012)
Traders With Indians (February 8, 2017)

Related Stories:
Bureau of Indian Affairs opens consultation on big economic proposal (02/07)
Gabe Galanda and Little Fawn Boland: Seize new tax opportunity with Donald Trump (12/29)
Bureau of Indian Affairs opens door to big shift in tribal economies (12/08)
Tribes urge Obama administration to take a stand on taxation (10/21)
Water agency in California files suit over new BIA leasing rule (4/25)

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