Report on reservation and resource development and protection

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Report on reservation and resource development and protection final report to the American Indian Policy Review Commission
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ix, 214 p. : ill. ; 24 cm.
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United States -- American Indian Policy Review Commission. -- Task Force Seven, Reservation and Resource Development and Projection
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Indian reservations   ( lcsh )
Indians of North America -- Economic conditions   ( lcsh )
Indian reservations -- United States   ( lcsh )
Indian reservations -- North America   ( lcsh )
Indians of North America -- Government relations   ( lcsh )
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At head of title: Committee print.
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Task Force Seven: Reservation and Resource Development and Protection.

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Full Text







[COMMITTEE PRINT]


REPORT ON RESERVATION AND RESOURCE
DEVELOPMENT AND PROTECTION




TASK FORCE SEVEN: RESERVATION AND
RESOURCE DEVELOPMENT AND
PROTECTION




FINAL REPORT TO THE
AMERICAN INDIAN POLICY REVIEW COMMISSION


Printed for the use of the American Indian Policy Review Commission

U.S. GOVERNMENT PRINTING OFFICE
77-462 WASHINGTON : 1976


For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 Price $2.20






































AMERICAN INDIAN POLICY REVIEW COMMISSION
Senator JAMES ABOUREZK, South Dakota, Chairman
Congressman LLOYD MEEDS, Washington, Vice-Chairman


Senator LEE METCALF, Montana
Senator MARK HATFIELD, Oregon
Congressman SIDNEY R. YATES, Illinois
Congressman SAM STEIGER, Arizona
JAKE WHITEC ROW,


JOHN BORB RID GE, Tlingit Haida
LOUIS R. BRUCE, Mohawk-Sioux
ADA DEER, Menominee
ADOLPH DIAL, Lumbee
Quapaw-Seneca-Cayuga


ERNEST L. STEVENS, Oneida, Executive Director
KIRKE KICKINGBIRD, Kiowa, General Counsel
MAX I. RICHTMAN, Professional Staff Member
III)









AMERICAN INDIAN POLICY REVIEW COMMIIsSION,
CONGRESS OF THE UNITED' STATES,
Washington, D.C., July 29, 1976:
DEAR COMMISSIONERS
Attached is the Report of the Task Force on Reservation Develop-
ment and Resource Protection.
Because of the budget constraints and reductions imposed on us over
the last several months, the report does not accurately reflect the
capability, dedication and professionalism of those involved. We feel
that the originally approved agenda and budget were adequate for
our task and that a higher quality product would have evolved had it
been possible to follow our original plan. However, we have recorded
the results of extensive research, analysis, conclusions and
recommendations.
It is the comprehensiveness of our recommendations which has
suffered by the recent budget reduction, but we have recorded the
condition of Resource Development and Protection at this point in
our history and have given our best efforts, with constraint of time
and money, to give you what we believe to be the problem and
recommendation to remedy the problem.
We all stand ready to respond to all questions which you may raise
as you begin to prepare your report to Congress and to testify as
needed.
Very truly yours,
PETER MAcDoNALD,
Task Force No. 7 Chairman.
KENNETH SMITH,
Task Force member.
PHILIP MARTIN,
Task Force M1lember.


(III)



















Digitized by the Internet Archive
in 2013














http://archive.org/details/nreservat00unit










AMERICAN INDIAN POLICY REVIEW COMMISSION,
CONGRESS OF THE UNITED STATES,
Washington, D.C., August 3, 1976.
Mr. ERNEST L. STEVENS,
Director, American Indian Policy Review Commission, Washington, D.C.
DEAR MR. STEVENS: Please find enclosed Task Force #7's Final
Reports. They include a final report on Reservation and Resource
Development and Protection; a final report on Indian Housing; and a
final report on the Alaska Native Claims Settlement Act.
The Task Force would like to acknowledge the help of the Central
Core Staff in collecting and tabulating data available in Washington.
In particular, we are grateful for the contributions of Nancy Evans,
John Kough, Dick Shipman, Jenice Bigbee and Kathryn Harris.
The Task Force members submit these Final Reports with the
condition that the attached letter accompany the reports to the
Commissioners.
Sincerely yours,
LORRAINE TURNER RUFFING,
Task Force No. 7 Specialist.













INDIAN POLICY REVIEW


TASK FORCE NO. 7
RESERVATION AND RESOURCE DEVELOPMENT AND
PROTECTION
FINAL REPORT
Peter MacDonald, Chairman
Kenneth Smith, Task Force Member
Philip Martin, Task Force Member
Lorraine Ruffing, Task Force Specialist
Leo Denetsone, Consultant
Bill Douglass, CORE Staff Member
Frank Ryan, Consultant
Ron Trosper, Consultant
Pat Porter, Research Assistant
A.T. Anderson, Special Assistant to Commission
(vii)


AMERICAN


. COMMISSION
















CONTENTS

Chapter
I. Introduction (F. Ryan) -----------------------------------------1
I. A. Federal Trust Responsibility and Economic Development (F.
Ryan) -------------------------------------------------- 3
B. Procedures in Data Collection (L. Ruffing) --------------------- 7
C. What Indian People Say (A. Anderson) ------------------------ 9
III. A. Tribal Governments as Promoters of Economic Development
(L. Ruffing) ----------------------------------------------15
B. Evaluation of Tribal Planning (F. Ryan) -----------------------19
C. Indian Resources: Control, Use, Development and Protection
1. Land Consolidation (L. Ruffing) ------------------------22
2. Indian Agriculture (L. Ruffing) -------------------------32
3. Indian Livestock Activities (L. Ruffing) ----------------- 40
4. Indian Minerals (R. Trosper) ---------------------------46
5. Indian Forest Management (R. Trosper) -----------------50
6. Indian Fishing (F. Ryan) ------------------------------61
D. Resource Protection (R. Trosper) -----------------------------63
1. State Taxation (R. Trosper) ----------------------------65
2. Water Rights (F. Ryan) -------------------------------68
E. Indian Capital and Manpower
1. Internal Indian Capital (L. Ruffing) ---------------------73
2. External Capital and Manpower (L. Ruffing) -------------78
3. Impact of Internal and External Capital (L. Ruffing) ----- 81
4. Structural Changes Necessary to Increase Impact of Ex-
ternal Capital (J. Hendricks and B. Anderson) 84
IV. A. Federal Government Policies and Programs (B. Douglass) --------87
B. Introduction to Factor Analysis Approach (B. Douglass) --------- 91
1. Capital (R. Trosper) ----------------------------------92
2. Infrastructure (B. Douglass) ---------------------------105
3. Human Resources Development (B. Douglass) -----------110
C. 1. Enterprise Creation by BIA and EDA (B. Douglass and L.
Ruffing) ----------------------------------------------119
2. Case of Indian Tourism (P. Porter) -------------------------123
V. Findings and Recommendations on Reservation and Resource De-
velopment and Protection ------------------------------------127
Transmittal letter from Peter MacDonald ---------------------127
I. Introduction -------------------------------------- 127
I. Reservation and Resource Protection ---------------- 129
III. Reservation and Resource Development --------------130
Exhibit "A"-A Bill -----------------------------------132
Exhibit "B"-A Bill -----------------------------------135
APPENDIX: SPECIAL PAPERS
I. Indian Mineral Agreements (R. Trosper) -------------------------137
II. A Case Study of EDA (F. Ryan) --------------------------------149
III. The Indian Housing Effort in the United States (R. Leatherman) --- 169
IV. A Case Study of Project Evaluation for an Indian Reservation (J.
Fitch and R. Trosper) ---------------------------------------196
(IX)














CHAPTER I


INTRODUCTION
The theme which dominates this report is that the current system of
exercising the trust responsibility by the Federal Government perpet-
uates economic dependence. The three necessary conditions for eco-
nomic development are control, capital, and management. Under the
present system these three conditions are not being met. The trust
responsibility must be clarified.
The birth of the trust responsibility lies in the nature of treaties. In
exchange for land concessions to the Federal Government, Indians
were to receive protection from foreign nations, hostile Indian tribes,
and individuals. Since only the Federal Government could extinguish
aboriginal title, protecting Indian tribes came to be regarded as a
trust; that is, the fiduciary responsibility to protect.
Unfortunately, there was no one to protect the Indians from the
Federal Government. The United States, by its own laws, illegally
seized Indian lands and forced Indians onto what were then submargi-
nal lands. Because others were prevented from extinguishing aboriginal
title, essentially, the trust responsibility meant that the Indians were
holding the land in trust for the United States, until it wanted it.
Protection of Indian lands and people meant that the Federal
Government should protect them from others. But in reality the
Federal Government exercised control over Indian attempts to use
what resources were left to them. Control of Indians could mean two
things. It could mean that the Federal Government would benignly
protect them from outsiders, leaving internal control with the Indians,
or it could mean internally controlling Indian action. Title 25 of the
United States Code, particularly section two, is the latter interpreta-
tion taken by the Executive and Congress. Only the Judiciary has con-
sistently taken the other interpretation. The judiciary has tried to hold
the Government to its word.
While the judiciary characterized the Federal-Indian relationship
as fiduciary in nature, the Executive through the Department of the
Interior interpreted "fiduciary" to mean acting for Indians rather
than acting to protect them. Title 25 of the United States Code allows
the Federal Government to act according to what it believes is the
best interest of the Indians.
Congress has placed primary exercise of the trust responsibility in
the Department of Interior. The Executive has interpreted this
responsibility to mean control of Indian affairs. Although this is an
improvement over the War Department, Indians still lack the internal
control over their resources and people, as guaranteed by their treaties.
Management and control of Indian resources by the Bureau of
Indian Affairs has meant custodianship of Indian resources for the
Federal Government. Failure to protect Indian rights to resources
has continued to erode what few resources tribes retained. Perhaps
out of guilt or hindsight recent Federal programs have tried to aid
(1)








Indians develop their remaining resources. Categorical grant programs,
directed at curing the symptoms of depressed Indian economies,
intensify the problem of lack of dominion or control. Without control
over their own resources and programs, tribal destiny is extinction.
For, how can one develop a resource without control over it? Federal
paternalism disguised as fiduciary action has deprived Indians of
control and has made them dependent upon Federal action. Would
Indian tribes be dependent if they could exercise control over their
reservations? They would only be dependent to the extent of their
capital needs. With freedom of action, management skills could be
built. Management cannot be built in a vacuum, where someone else
manages for you. It is indeed ironic that the Federal Government
claims that Indians mismanage their affairs, when it is the Federal
Government who is doing the mismanaging.
The theme which runs throughout this report is that without con-
trol over their own affairs, the Federal Government cannot expect
total Indian economic development. The report seeks to redefine the
trust responsibility and its relationship to economic development.
Trust responsibility means protection of tribal assets. It means that
Indians control their own destinies.
The report adequately demonstrates the disastrous economic
consequences suffered by Indian tribes due to preemptive Federal
control. The message is that the Federal Government has caused this
state of affairs and is responsible for stultifying Indian action. The
current interpretation of the trust responsibility has created barriers
to reservation development. The report considers the barriers and
recommends a vehicle for their elimination. The new trust responsi-
bility is responsible to and compatible with three important conditions
for reservation development, control, capital, and management.
It is impossible to attain economic self-sufficiency and political
self-determination in a system which perpetuates economic depend-
ence. This requires a commitment on the part of the Federal Govern-
ment to return control to Indian tribes. Failure to do so means that
Indian resources will continue to be held in trust for the public.











CHAPTER I1


A. FEDERAL TRUST RESPONSIBILITY AND ECONOMIC DEVELOPMENT
The United States of America recognized the independent
sovereignty of Indian tribes when it honored treaties previously made
by Great Britain with Indians, Holden v. Joy, 17 (Wall) U.S. 211,
242, 243 (1872); Turner v. American Baptist Missionary Union, 24
Fed. Cas. No. 14251 (C. C. Mich. 1852). In the early days of the
Republic, Indian tribes were recognized as independent sovereigns.
As a consequence, the Trade and Intercourse Acts prohibited States
and individuals from acquiring title to any Indian lands except by
process of public treaty undertaken and secured by authority of the
United States. See, (Passamaquoddy Tribe) v. Morton, 528 F. 2d, 370
(1st Cir. 1975); see also, Johnson v. McIntosh, 8 (Wheat.) U.S. 543
(1823). The Intercourse Acts respected tribal sovereignty. It has come
to be a recognized principle of American Indian law that Indian
tribes are still possessed of a limited sovereignty and possess all of
those powers of government which have not been proscribed on the
Federal Government.
In exchange for giving the United States sole right to extinguish
aboriginal title, the United States agreed to protect Indian tribes.
The essence of what has come to be known as the "trust responsibility"
exists because of the exchange between two sovereigns. The trust
responsibility is a legal duty. The distinctive obligation of trust
incumbent upon the United States in carrying out its treaty obliga-
tions must of necessity be self-imposed. Not only is there a public
trust to citizens of the United States that their government keeps its
word, but there is a trust obligation to the obligee.
The court in Seminole v. United States, 316 U.S. 286, 297 (1942)
stated that the United States:
has charged itself with moral obligations of the highest responsibility and trust.
Its conduct as disclosed in the acts of those who represent it in dealings with the
Indians, should therefore be judged by the most exacting fiduciary standards.
In reaching its conclusion regarding the United States' fiduciary
responsibilities to a people whom the Federal Government had
pledged to protect, the Seminole court adopted Mr. Justice Cardozo's
fiduciary standard expressed in Meinhard v. Salmon, 249 N.Y. 458,
464, as the standard applicable to the Federal Government.
Many forms of conduct permissible in a workday world for those acting at
arm's length, are forbidden to those bound by fiduciarities. A trustee is held to
something stricter than the morals of the marketplace. Not honesty alone, but
the punctilio of an honor the most sensitive, is then the standard of behavior
Only thus has the level of conduct for fiduciaries been kept at a higher level than
that trodden by the crowd. (Emphasis supplied).
The courts have been mindful of the fiduciary responsibility due to
Indian tribes, and when this trust has been breached, courts have
found such a breach to be an abuse of discretion. In (Pyramid Lake v.
Morton, 354 F. Supp. 252, 256 (DCDC, 1973) the court stated that
(3)








the Secretary of the Interior's action was "defective and irrational
because it fails to demonstrate an adequate recognition of his fiduciary
duty to the tribe. This is also an abuse of discretion and not in accord-
ance with law."
Under the Commerce Clause of the United States Constitution and
through various treaties, statutes, and judicial doctrine, the United
States has recognized tribal sovereignty and come to recognize its
fiduciary responsibility to them. The legal duty to protect Indian
tribes is the trust responsibility. It follows therefore that the major
responsibility of the Federal Government should be to protect Indian
tribes from erosion of tribal sovereignty, to protect resources from
outside interests including the Federal Government. Inherent in the
protection of Indian assets in accordance with the trust responsibility
of the United States is an obligation to fully, vigorously, and without
reservation, support tribal efforts to develop their own resources. For,
without development of tribal resources, protection is a meaningless
gesture.
Proper exercise of the trust responsibility can allow Indian tribes to
attain "economic self-suficiey.nc" Economic self-sufficiency means a
strong tribal economy which generates income which can be used to
support the tribal government and such services as the tribes wish to
provide their members. No tribe can achieve economic self-sufficiency
without three important conditions.
(1) Tribal Jurisdictional Control.
(2) Availability of Capital.
(3) Management.
The Ideal: Tribal. Economic Independence
TRUST RESPONSIBILITY

JURISDICTIONAL CONTROL TRIBAL INCOME
Administrative ''Undistributed
Legislative Tribal rents
Judicial Undistributed
Government profits



Trib oFunds Economic Environment
US Government ith
SBanking System Infrastructure INCOME
Resources wages
profit

MANAGEMENT No
ib
FdrlAdSel f-Sufficiency TRIBAL MEMBER
~cons umptio=
Activities Saving



1iur 1"1, shiowv thitt tribal governmentA is able to regulate economic
processes on the reser-vation. Prosperity provides the government'with








sufficient revenue for internal financing of some activities, while the
Federal Government provides capital and management assistance both
to strengthen protection and to aid economic development. Figure 1
illustrates a self-sufficient economy within the proper practice of trust
responsibility.

| IW |'nc( --e
CaD~~tar --a~ e~
U.S. Govt Grants a:,
Tribal Funds N .
Cczrmercial oanr.s Fedral A'dvc
IJ:S:? Z. c.1iER FEDERAL A=C-FS


Triba




|pa Department of t State Taxation of i bers
Interiorib sorcs
,-..a .Jurisds ct o ""

Restricted Trust
BIA In---e and Enter-
Sel--Dterni- Tribal Goverment TBet prise


CURFou TRIBAL DEPE

FIGURE 2

Figure 2 shows the improper exercise of federal power under the
guise of trust responsibility. Using the rhetoric of protection and
development, the government has instead erected barriers between
Indians and their economic processes while tearing down barriers
between states and tribes. State interference impedes Indian develop-
ment. Tribal governments are weak because the Federal Government
retains powers to veto all budgets and resolutions. Resources remain
unused and unprotected. Actual exercise of federal power has blocked
Indian attainment of the three conditions for economic self-sufficiency,
jurisdictional control, capital and management.
(1) JURISDICTIONAL CONTROL
The Federal Government must assist the tribes to take complete
jurisdictional control over factors related to economic development.
Greater administrative and legislative control requires less inter-
ference by the Federal Government under Title 25 of the United
States Code with tribal economic development. Agencies should be
required to complete federal-Indian rights impact statements for all
actions which may impinge upon Indian rights and jurisdiction.
Further, a clearinghouse for all legislation which may affect Indian
rights and jurisdiction should be established so that Federal Acts do








not inadvertently affect the totality of tribal jurisdiction. Judicially,
tribal courts should be accorded full faith and credit for their judg-
ments. Tribal courts should be assisted to become courts of record.
Jurisdictional control in personam and in rem would make it possible
for tribes to chart their own courses for economic development and
provide independence of thought and action. Tribal laws when en-
forced consistently and fairly would provide credibility and create a
more favorable economic environment for Indian residents as well as
for non-Indians.
(2) AVAILABILITY OF CAPITAL
If the Federal Government would provide sufficient capital, it would
be possible on all but the smallest reservations to establish individual
and tribal enterprises strong enough to produce a profit, after paying
the costs of production, and would provide tribal members a share as
workers or as owners. Trust responsibility in the context of reservation
development requires capital grants, rather than long term low
interest loans, or guarantees for business development. Should the
Federal Government wish to provide sufficient capital, it must be in
the form of equity grants. Should the Federal Government not provide
capital grants, tribes can find capital themselves through exercise of
their jurisdictional powers. Large reservations, particularly, would be
able to use private capital or long term federal capital in the absence
of grants. Small reservations would face formidable obstacles if capital
is unavailable.
(3) MANAGEMENT ASSISTANCE
Management assistance, technical advice, education and access to
specific skills, are different from management. Ultimately, Indians
must provide their own management, and attempts by the Federal
Government to do so leads to an incorrect understanding of trust
responsibility. Executive control of reservation based enterprises is
exclusively the domain of tribal government and Indian leadership.
These managers could use advice from outside, but would choose
what to adopt and what not to adopt.
In the ideal world where the Federal Government lives up to its
trust responsibility, control, capital, and management would produce
economic self-sufficiency such as depicted in Figure 1. The enterprises
would produce income: income for tribal members; tribal income
in the form of undistributed rents and taxes from non-tribal enterprises;
and profits from tribal enterprises. Such tribal income would be at the
disposal of the tribal government, and the circle depicted in Figure 1
completed.
Present barriers to economic self-sufficiency prevent the creation
of a favorable economic environment and diminish the amount of
capital and management available, as in Figure 2. Failure by the
Federal Government to properly fulfill its trust responsibility has
retarded reservation development. Because of the interdependence of
control, capital, and management, it is clear that development will
continue to be blocked or interferred with if all three conditions are
not simultaneously met.









B. PROCEDURE OF DATA COLLECTION

Task Force #7 was specifically charged with the mandate to investi-
gate the development needs of Indian people now and in the future.
The Task Force chose to investigate the obstacles ot economic develop-
ment and to search for solutions to those problems. Surely, develop-
ment problems differed between large and small reservations, between
allotted and non-allotted reservations, between reservations in Public
Law 280 states, and reservations in non-Public Law 280 states, and
among reservations in the Northwest, Southwest, North Central,
Central, Northeast, and Southeast. How then, could the Task Force
study the development obstacles which were particular to each type
of reservation as well as those obstacles which were common to all?
Furthermore, how could it ensure that no group of Indian people living
in these different situations was left unrepresented?'
The selection of representative reservations was further complicated
by the fact that the Task Force had very limited time, personnel, and
funds.
The Task Force was left no other choice than to visit a limited num-
ber of representative reservations. To ensure that every reservation
had a chance to participate in the Task Force investigation, it was
decided to select the reservations at random within the various cate-
gories of types of reservations.3
The Task Force specialist organized 288 federal and state reserva-
tions into four groups according to size and existence of allotted land.
These characteristics directly affect economic development. Table 1
divides the 288 reservations into four groups: small non-allotted,
small allotted, large non-allotted, and large allotted.

TABLE I.-BREAKDOWN OF RESERVATIONS BY SIZE 1 AND PATTERN OF LAND HOLDING 2

Total num-
ber of
Pattern of landholding Small Large reservations

Nonallotted ----------------------------------------------- 141 48 189
Allotted --------------------------------------------------- 47 52 99
Total number of reservations -------------------------------- 188 100 288

Any reservation with more than 25,000 acres was considered "large."
2 Any reservation with more than 10 percent of its trust land base in individual Indian allottments was considered
"allotted."

I The scope of the Task Force work has been necessarily limited to reservations, as can be seen from its
title:
"Reservation and Resource Development and Protection." To serve Indian people more completely it
would have been advisable to include terminated and non-federally recognized Indian communities as well
as urban communities. Hopefully, their development problems will be addressed by Task Force Nos. 8
and 10. In the few contacts Task Force #7 had with state (non-federally recognized) reservations in Maine,
Virginia, New York, and Louisiana, these people thought the biggest obstacle to their development was
lack of federal recognition. However, in Texas, state reservations did not feel federal recognition was essen-
tial for development because the state had been particularly generous to them.
2 The Task Force was composed of three part-time Indian members and one full time specialist as well as
those Indian experts that could be hired from time to time. The Task Force was given one year and $105,673
to undertake its investigation.
3 Some might question selecting reservations at "random." It is a mysterious process for most and they
would feel more confident in choosing what they know are "typical" reservations. Selecting typical cases
usually introduces some subjective bias on the part of the person making the selection. For example, the
person would only pick those typical cases in his geographic area that he knew or only those cases that had
gotten national publicity. All the other reservations of which he was unaware would have had no chance
to participate and so the selection would not be truly representative.
77-462-76-2








Indian Population distribution among the groups according to BIA
records was as follows:
Percent
of Indian
People
Small nonallotted ------------------------------------------------- 20. 9
Small allotted -----------------------------------------------------7 9
Large nonallotted -------------------------------------------- ---28.4
Large allotted ----------------------------------------------------42. 8
The Task Force used population percentages as a basis for allocating
its site visits. The Task Force decided that it could visit 32 reserva-
tions: 7 small non-allotted, 3 small allotted, 9 large non-allotted, and
13 large allotted. Among those chosen at random from the groups
were:
Small nonallotted.- Carson City, Nevada; Havasupai, Arizona; Moapa, Nevada;
Nambe, New Mexico; Picuris, New Mexico; Prairie Island, Minnesota; and
Reno-Sparks, Nevada.
Small allotted.-Chehalis, Washington; Kickapoo, Oklahoma; and Swinomish,
Washington.
Large nonallotted.-Duck Valley, Nevada; Fort Apache, Arizona; Fort Mc-
Dermitt, Nevada; Hoopa Valley, California; Hualapai, Arizona; Laguna, New
Mexico; Makah, Washington; Morongo, California; and San Carlos, Arizona.
Large allotted.- Cheyenne River, South Dakota; Colville, Washington; Crow,
Montana; Crow Creek, South Dakota; Fort Hall, Idaho; Lac du Flambeau,
Minnesota; Nett Lake (Bois Forte) Minnesota; Omaha, Nebraska; Rosebud,
South Dakota; Spokane, Washington; Standing Rock, North Dakota; Umatilla,
Oregon; and Warm Springs, Oregon.
Reservations were visited by either a Task Force member, the
specialist, or a consultant, depending upon availability and geographic
location. The individual usually spent three days interviewing the
tribal council, the tribal chairman, and the tribal planner. The objec-
tive was to collect pertinent data needed to determine what the ob-
stacles to development were on that reservation. Data was collected
by a questionnaire. The questionnaire was used to ensure that data
could be uniformly compared. The interviewers succeeded in under-
standing local economic conditions to the extent that Indian leaders,
willingly and patiently, helped them to comprehend it. Often Indian
leaders openly disclosed their problems with the local BIA, county,
state, and Federal governments and submitted whatever data they
had available. At other times Indian leaders would not reveal their
problems for fear of reprisal from these institutions. They would not
release data which they thought could be used against them. In order
to protect the identity of the thirty-two reservations in the study,
each one is assigned a code number where sensitive data is involved.
To complement our data collection at the reservation level, the
Task Force initiated four other data gathering efforts. In order to
ascertain the opinions of all Indian people on economic development,
short opinion polls were sent to the 288 reservations. Twenty-eight
were returned. Investigations were started on the federal level to de-
termine what role the government agencies were playing in promoting
economic development. Among the agencies studied were the Bureau
of Indian Affairs (BIA), the Economic Development Administration
(EDA), the Department of Labor (DOL), the Department of Agricul-
ture (DOA), the Small Business Administration (SBA), the Office of
Minority I business Enterprise (OME), and the Office of Native
Aeiwrican Programs (ONAP). Data was collected on past and present








programs, on funding, and an attempt was made to evaluate their
impact on development.
The Task Force also commissioned four special papers which treat
particular subjects in-depth (Indian mineral development, EDA) or
address an issue which had been omitted from the original scope of
work (Indian housing, Alaska Native Claims Settlement Act).
This report is based on information gathered from thirty-two reser-
vations, from an opinion poll, from investigation of federal agencies,
and from special subject papers.

C. WHAT INDIAN PEOPLE SAID
The continuing search for understanding of Indian feelings toward
"Development" took the form of seven open-ended interview ques-
tions to 32 tribes and eleven mailed questions to all Land-based
Indian tribes.
SEVEN OPEN-ENDED QUESTIONS
1. What does "development" or progress mean to the tribe?
2. How is the tribe going to achieve this development?
3. What will the tribe need to achieve this development?
4. How is the tribe going to get what they need to develop?
5. What are the obstacles to development on the reservation?
6. Are there any other problems on the reservation that influence
development that we should know?
7. What do you think the American Indian Policy Review Com-
mission should be doing about reservation development and resource
protection?
These questions were asked and recorded in personal visits with
Indian people along with the detailed economics questionnaire.
A supplementary questionnaire (11 questions) was also sent to all
tribes not included in the site visit schedule. Twenty-eight question-
naires were returned. The answers were organized under the above
seven questions.
MAILED QUESTIONS
1. What is development?
2. Is there a particular kind of "development" which is best for
your people?
3. How is the tribal council promoting this development?
4. What government agencies or private institutions are promoting
this development?
5. What are the most important obstacles to your development?
6. How can these obstacles be removed?
7. What programs or laws would best promote development or
remove the obstacles to your development?
8. What kind of protection do you have for your resources? Please
include any codes enforced by.the tribal government.
9. Does the BIA provide adequate resource protection? If not,
please explain.
10. Who is the principal offender(s) in depleting or damaging your
resources (state, private corporations, local non-Indians, others)?
11. What do you think the American Indian Policy Review Corn-








mission should be doing about reservation and resource development
and protection?
Opinions from sixty-one tribes are included in the following seven
topic areas.
(1) UNDERSTANDING
What does "development" or progress mean to the tribe?
The diversity of tribal operations and the complex ty of laws,
agencies, treaties, quality and quantity of the land base, make a
discrete summary of the feelings difficult. To preserve the integrity and
feelings about development, quotes are used as follows:
"To strengthen sovereign powers and to become self-sufficient by development
of resources to create jobs for everyone."
"Development of tribal enterprises to provide financial security."
"Development means the building of a self-sustaining economy which provides
jobs for tribal members without damaging the natural resources or Indian cultural
values."
"Stabilizing economic conditions to improve health and welfare of the reserva-
tion and its people."
"Develop better management of tribal government so that more individuals can
operate their own businesses."
"Development of local communities through education and human resources
projects."
"Affording the youth a chance to remain in the tribal community through
appropriate job training."
"Development of industry to obtain a guaranteed income for the tribe."
The priority for most tribes appears to be self-sufficiency through
tribal government development so that in the near future their people
may fully partake of the "American Dream" in their own Indian way.
There is a strong feeling that they no longer want to depend on Gov-
ernment grants but on their own human resources for their security and
comfort.
Each tribe feels that it is unique and the uniqueness ought to be
recognized by all federal agencies in participative development
projects.
(2) ACHIEVEMENT
How is the tribe going to achieve this development?
The answers to this question ranged over a wide area in detail but
were easily categorized into the responsibility of tribes to develop
their own unique physical, psychological and social infrastructure. It is
significant to note that no answers indicated that future development
was someone else's responsibility other than the tribe's.
Several significant opposing views were expressed-for instance
from: "We will protect the land, by war if necessary. We will acquire
the skills, learn the language and manage our own tribal business
affairs. This does not include joint ventures."
To: "We prefer development through the private sector over Tribal
ownership."
This infrastructure to be built through education, community
centers, communication systems on an inter- and intra-reservation
basis along with easy contact with the outside world such as Govern-
ment agencies, schools, colleges and the Business and Industrial
sector.
The need for strengthening their ownership and sovereignty over
land, water and minerals is a priority. Additional land acquisition is a







significant part of their growth. Some tribes also feel that development
can be more safely managed through inter-Tribal councils.
There is a pervasive feeling that a major improvement in the rela-
tionship between Federal Government agencies and tribes must be
accomplished. Some tribes feel that they must develop extensive train-
ing programs to give their people a clear understanding of agency oper-
ations. Others feel that the "Government" ought to organize itself so
that tribes can work through one agency instead of a dozen or more.
Most tribes cannot afford the luxury of organizing to deal with many
agencies.
There is a universal view that long-range plans for reservations
is essential. They are generally not satisfied with planning to date.
The HUD-701 plans are an improvement but much more needs
doing. A granting process to span five years was viewed as an im-
provement over the year to year or short-term grants.
(3) NEEDS
What will the tribe need to achieve this development?
One tribal chairman answered as follows: "To achieve this develop-
ment we will require capital, political and managerial control, tech-
nical services, effective protection of tribal sovereignty and trust
land, more housing, and the talent, ideas and leadership by our own
people."
A substantial response indicates that one of the priority needs is
for access to capital markets by tribes and Indian individuals. A
mechanism for borrowing money for development must be found
until Indian tribes and individuals can earn the respect and trust of
those who have capital. The desire is for Indian business people
to have the same relationship to banks and product markets as do
other Americans.
One tribal chairman answered the question at a council meeting
by simply saying: "Education and training."
Others feel there is little hope until they can increase their land base
and those who have a large land base feel that soil erosion, poor land
management by lessees, and extremely poor leases for agricultural and
mining properties which they are locked into are frustrating and
infuriating.
Access to capital must be accompanied by appropriate technical
assistance; one without the other is impractical.

(4) PROCEDURE
How is the tribe going to get what they need to develop?
This question was answered by only 23 of the 32 respondents, and
the answers reflected poorly defined ideas on how attainment of their
aspirations may be fulfilled.
The most significant point was that there appear to be many
opportunities to obtain help but the tribes were not trained to know
how to proceed. The answers also reflect an absence of middle manage-
ment people in the tribes who can do the work with expeditious good
judgment.







Some discrete quotes on the question are:
"Tribe needs to develop business acumen rapidly. Ability to make economic
decision on economic rather than on a political basis. Develop management and
fiscal controls and enforce them."
"Development of enterprises with emphasis on individual participation so
they will become less dependent on sale of allotted land. Large amounts of de-
velopment capital are needed."
Most of the respondents like the idea of going to a number of
agencies for help so they do not feel as dependent on and confined
to BIA. The cost of negotiations for assistance through many agencies,
however, is a luxury most tribes cannot afford. This inequity results
in poorly defined programs which are under-funded and have little
prospect of success from the beginning. Even if the Tribe recognizes
this shortcoming, it proceeds on the basis that something is better
than nothing.
(5) OBSTACLES
What are the obstacles to development on the reservation?
Obstacles mentioned by most respondents were isolation, control,
jurisdiction, incompetent leases, heirship, apathy, and lack of control,
jurisdiction, and fiscal responsibility by tribal government.. While
these were the words most often used, analysis of the language and
other feelings expressed in context indicate that the cost of negotiating
for their unique growth opportunity is very high. This cost in time
and dollars results in frustration which is directed toward isolation,
jurisdiction, etc.
The tribes who look to Indian industrial enterprise for jobs feel that
industrial organizations don't understand the benefits they can
share with Indians by building production facilities on reservations.
Some comments are:
"Lack of initiative to enter into business ownership."
"Heirship problems prevent proper use of land and encourage sale of the land."
"Lack of education, risk capital and failure to follow-up long range plans.",
"Money--BIA incompetence."

(6) OTHER PROBLEMS
Are there any other problems on the reservation that influence
development that we know?
This question was apparently not rigorously pursued by the inter-
viewers because the answers were sketchy and incomplete. No unusual
subjects were raised. The emphasis, however, seemed to be on heirship
and problems of dealing with Anglos on the periphery of the reserva-
tion. The animosity and anatgonism which exist is a challenge for
tribes faced with the problem. Perhaps the greater emphasis on cost
of negotiation was mentioned in many different ways including the
high cost of litigation, lawyers' fees, land consolidation, and negotiating
time with agencies, especially the BIA.

(7) REVIEW COMMISSION
What do you think the American Indian Policy Review Commission
should be doing about reservation development and resource
protection?






13

This question engendered the greatest interest, if the length of the
answers is a measure.
Several subjects received equal support. They are:
Recommend legislation that would continue some kind of Indian group to
carry on the work which the Commission has started. Poor continuity or the
absence thereof is a general problem throughout all relationships with the
Government.
Recommend legislation which would strengthen sovereignty, support land
acquisition and accompanying funds to implement the legislation.
Recommend legislation which would resolve the complexities of the heirship
problem. This should be accomplished through detailed discussion with tribes
having the problem. The "public hearings" process is inadequate.
Most interviewees had a good working knowledge of the Com-
mission and the mandate. These tribes seemed free to discuss the
subject openly and to voice their hopes, aspirations and frustrations.
It will suffice to list the subjects suggested for serious legislative
consideration, which is preferred to Executive Order and Depart-
mental Regulations and Guidelines. Some tribes felt that directives
by Congress would be more equitable to Indian people than Agency
regulation. The subjects are:
Recommendations to:
Restructure the BIA.
Improve youth programs. Develop appropriate education. Accommodate
self-regulation and local control.
Provide for a unification process for all Indians.
Assist tribal government development and long-term funds.
Mandate Congress to have closer psychological and physical contact with
Indian people.
Create an Indian Research Center.
Develop a process for co-management with State Government.
Include review of report by Tribes.
A way to have better and easier access to Washington, D.C.-e.g., eliminate
the Agency offices.
Leave us alone so we can continue to live in harmony with nature.
Redefine, classify and improve Technical Assistance to be more appropriate to
the uniqueness for the Tribe.
Develop a more expeditious communication system with Congress and the
executive agencies.















CHAPTER III

INTRODUCTION
This chapter examines economic development from the perspective
gained by investigating thirty-two reservations. Among the issues
examined are the ability of tribal governments to control and promote
economic development, the scope and quality of tribal planning, the
current control, use and development of reservation resources in-
cluding land, minerals, timber, water, and, finally, the insufficiency of
capital and manpower training.

A. TRIBAL GOVERNMENTS AS PROMOTERS OF ECONOMIC DEVELOPMENT
If one advocates Indian control of economic development, then the
logical promoter of such development should be the tribal govern-
ment. The purpose of this section is to examine tribal governments as
independent decisionmaking units. Such independence is necessary
for tribal governments, if they are to promote economic development
consistent with tribal goals.
Table 1 illustrates the great variation in the complexity of tribal
government structure among the thirty-two reservations. Complexity
is usually a function of the size of the population to be governed and
the economic wealth of the reservation.
TABLE I.-RESERVATION STATISTICS AND FORCES OF TRIBAL GOVERNMENT
Number of Structure
tribal
government Council Adminis- Tribal
Reservation Trust employees and istrative enterprises/
Reservation code No. population land area (full time) chairman Committees divisions entities
1----------------------- 194 160 0 X 0 0 0
2 ------------------------ 244 2,296 22 X 4 0 0
3_____ ....4,538 1,398, 934 NA X 9 71 15
4 ----------------------- 4,816 1,076, 592 157 X 8 15 7
5 -------.--------------- 4,144 1,567,827 97 X 14 20 NA
6_____ . . . .1,429 105,557 123 X 4 5 3
7 ------------------------ 959 289,819 22 X 1 1 4
8 ---------------------- 8, 097 1,644,972 149 X 35 17 7
9 ----------------------- 2,979 481,673 70 X NA NA 2
10 ---------------------- 512 35,577 0 X 2 0 1
11 ---------------------- 396 188,077 10 X NA 1 3
12 ---------------------- 1,060 86,072 60 X 4 8 3
13 ---------------------- 797 993,173 25 X 12 1 4
14 ---------------------- 655 5,846 3 X 1 5 0
15 ---------------------- 1,016 44,493 4 X 15 1 4
16 ---------------------- 3,196 417,295 60 X 5 13 1
17 ---------------------- 902 27,052 75 X 5 10 0
18 ---------------------- 165 1,174 5 X 7 3 1
19 ----------------------- 257 32,242 3 X 1 1 0
20 ---------------------- 381 19,075 2 X 7 1 0
21 ----------------------- 507 41,778 4 X 12 1 2
22 --------------------- 1,331 27,413 35 X 5 14 2
23 ---------------------- 198 14,946 2 X 2 1 2
24 ----------------------- 84 534 0 X 2 3 0
25___- ........ -566 28 2 X 5 1 1
26 ---------------------- 8,410 958,473 73 X NA NA NA
27 --------------------- 6,141 1,827,421 127 X 4 NA 0
28 ---------------------- 743 136,925 35 X 11 4 0
29 --------------------- 5,133 849,339 188 X 4 17 12
30 ---------------------- 430 3,430 33 X 2 7 1
31 ---------------------- 700 75,351 70 X 1 5 1
32 --------------------- 2,190 639,655 263 X 3 23 5
Note: The smallest government (1) consists of an elected tribal business committee whose members serve voluntarily;
the largest (32) consists of a tribal government with 23 administrative subdivisions employing in excess of 250 people.
(15)






16

The necessary minimum for tribal government is an elected council
or business committee whose chief executive is the chairman.
Often the same people serve on the council committees, and in the
administrative divisions. Thus, the same people who make policy
implement it. Consequently, when the policy-makers are not re-
elected, there is a turn-over in administration.
Some tribal governments have realized the instability this constant
turnover creates and have designed a structure in which policy-makers
(council members) are distinct from administrators and managers.
Some tribes have expanded beyond mere administration and have
begun to directly promote economic development by developing their
resources through tribal enterprises. Among the examples of resource-
based enterprises are tribal ranches and farms, logging companies,
sawmills, wood-products factories, fisheries, resorts.
The question arises, what is a tribal government? Is it similar in
function to a county government or a state government? One of the
thirty-two governments provided an answer, "An Indian tribe is, or
can be, a government, a landowner, a business firm and a social organi-
zation." Tribal Governments are unique.
One of the thirty-two reservations has proposed the following struc-
ture to enable it to govern, to provide services, and to develop its
resources:


Local Economic
development districts



Other local
districts


BIA Agency



Adm. & Planning
& legal affairs


I Resource Develop-
ment, Management
& Protection


Federal Agencies



State Agencies


Tribal Executive
Director



Accounting


Forestry Law & Order Credit Roads
Range Health Construc- Building
Minerals Education tion Utilities
Housing Forest
Products
Agriculture






17


RESTRICTION OF TRIBAL CONTROL
The successful fulfillment of responsibilities is dependent not only on
an adequate structure but also on the absolute amount of control the
policy-making body can exert. As explained in Chapter 11, the tribal
government's control is severely limited by Secretarial approval
powers; 25 U.S.C., Section 2 gives the Secretary ultimate control over
the tribe.
"The Commissioner of Indian Affairs shall, under the direction of
the Secretary of the Interior, and agreeably to such regulations as the
President may prescribe, have the management of all Indian relations."
(25 U.S.C. section 2.) The tribal government's power is also limited
by the interference of state and local governments, especially in
Public Law 280 states.1
In the area of state interference, tribal governments have recently
scored a victory and a defeat. The State of Minnesota was prohibited
from taxing Indian reservation residents. In Bryan v. Itasca County,
Minnesota, the judge ruled that PL 280 did not give the state taxation
powers on Indian reservations. In the case of Indian water rights, the
Supreme Court ruled in Akin v. U.S. they must first be adjudicated in
state courts, thus giving the state the first opportunity to decide this
controversial issue. In many reservation areas, many non-Indians have
organized themselves into citizens' groups in order to make sure that
tribal resources and tribal jurisdiction are limited to a minimum.
Typical of these groups is the South Dakota Civil Liberties League.
Also typical of local interference is the practice of some Congressmen
and Senators of inserting restrictions to the yearly Congressional
appropriations of Indian funds which prohibit the use of such funds for
land purchases. Obviously, their local constituencies want to restrict
the size of the Indian land base.
DEPENDENCE OF TRIBAL GOVERNMENTS
Tribal power is not only limited by Secretarial, state, and local
interference, but it is also weakened by a financial dependence on the
federal government. Tribal government will never be free from federal
pressures as long as the federal government finances the cost of the
tribal government. This section discusses the tribal government's
financial dependency as well as dependent reservation economies.
While tribes are quasi-sovereign entities in the legal sense, they will
never. be able to successfully exercise their sovereign powers unless,
among other things, their tribal governments are financially independ-
ent and their reservation economies are self-sustaining as described in
Chapter II, Figure 1.
Unfortunately, the Task Force was not able to measure the degree of
dependency of each of the thirty-two reservations economies. Any
comprehensive study which seeks to address the problem of reserva-
tion development, should include a definition and measurement of
dependency.
The -General Accounting Office (GAO) measured the dependency
for the White Mountain Apaches, one of thirty-two reservations.
I The issue of the proper division of federal, state, and tribal jurisdiction or power is the subject of another
task force. See their report for a discussion of the problems in PL 280 states.
Comptroller General of the U.S., "Better Overall Planning Needed to Improve the Standard of Living
of White Mountain Apaches of Arizona." General Accounting Office, August 12, 1975'







They discovered that in 1972, federal funds accounted for 81 percent
of all reservation expenditures; state and local funds, 12 percent; and
tribal funds, 7 percent. The study found that dependency on the
federal government increased from 1968 to 1972.
One step in achieving tribal control of government is financial
independence of that tribal government. Task Force No. 7 made an
attempt to assess the potential for financial independence by compar-
ing tribal government expenditures for 1975 with tribal disposable
income from all tribal sources for 1975.3
The following table illustrates how many tribal governments are
capable of being financially independent and which are not.
TABLE 2.-TRIBAL INCOME COMPARED TO TRIBAL GOVERNMENT EXPENSES
Resource base
Tribal income ex- Tribal income Tribal income is inadequate to gen- Resource base is
ceeds tribal gov- equals govern- less than govern- erate sufficient adequate but un-
Tribal government ernment expenses ment expenses ment expenses tribal income developed
(1) (2) (3) (4) (4a) (4b)
Number ---------- 11 9 12 4 8
Percent 34.3 28.1 37.5 ------------------------------------

Table 2 shows that 34.3 percent of tribal governments studied were
not only capable of financing their governments but also would have
had some funds left over to invest in their own economic development.
They would not, however, have been able to provide all the social
services (health, education and welfare) needed by their resident
populations. Only 28.1 percent would have been able to cover their
annual administrative expenses with nothing left over for development
activities or social services.
Not surprisingly, 37.5 percent were not able to pay their normal
government operating expenses. Necessarily, they were dependent on
the federal government to provide funds for development and for
services. Of these governments, four have physical resource bases so
inadequate that it is difficult to ever imagine them achieving political
or economic self-sufficiency. There is the possibility, of course, that
if their residents were adequately educated and were employed, they
could support their tribal government through taxation. But this
depends on the attainment of three long term goals: (1) adequate
education for everyone; (2) full employment; and (3) a system of
tribal taxation. None of these goals are likely to be attained in the
near future. These four governments were, are, and will be heavily
dependent on the federal government, particularly on the Bureau of
Indian Affairs (BIA). If AIPRC recommendations include a re-
structuring of the BIA, they are likely to encounter understandable
opposition from these reservations and all reservations in similar
circumstances.
Eight of the reservations whose governmental administrative
expenses exceeded their tribal income, have physical resource bases
which, if developed through tribal enterprise, would generate adequate
revenues to cover such expenses. This does not mean to imply that
the first group whose income exceeded expenses had developed their
I Tribal government expenditures were not always met from tribal income. In many instances, tribal
expenses were met by federal program funds such as the tribal government development program CETA,
or revenue sharing







resources. In most instances their favorable situation was the result
of their unusually large physical resource base and the fact that the
revenues from it accrued to them. It does not mean to say that their
large resource base was developed to any substantial degree.
In sum, no tribal government exercised the control necessary for
development due to Secretarial approval powers. Furthermore, 37
percent of the governments studied did not have the financial resources
to support even the administrative operations of their government.
B. EVALUATION OF TRIBAL PLANNING
The Federal Government has encouraged and financially supported
planning by American Indian tribes for a number of years. Of the
thirty-two Indian reservations considered, all have been, or are covered,
by Economic Development Administration Overall Economic De-
velopment Program plans.' More than half of the reservations stud-
ied also have Department of Housing and Urban Development
Section 701 Comprehensive Planning Assistance Plans. Most notably,
federal efforts have centered on EDA and HUD comprehensive
plans, but the Bureau of Indian Affairs, Department of Health, Edu-
cation and Welfare and Department of Agriculture have also sup-
ported Indian planning efforts.
PLANNING PROCESS
The planning process requires that goals be set by the community.
These goals may be broad and general in nature. The process then
requires that a series of objectives be stated, which if pursued, should
lead to achievement of the stated goal. As a consequence, it is neces-
sary that objectives be specific and quantifiable, otherwise it is im-
possible to know whether progress is being made and at what cost.
The next step in the planning process is to choose appropriate projects.
Since communities may prefer that certain objectives be pursued
sooner than others, or that more resources be expended in attaining
a certain set of objectives, these preferences must be embodied in the
choice of projects. A methodology must be selected to rank potential
projects in terms of objectives. This methodology will also provide
for a means of periodic evaluation of progress and costs of projects.
The fundamental development problem which Indian tribes seek to
overcome through planning is to increase the limited absorptive
capacity of the reservation's economy. Absorptive capacity is the
opportunity for profitable economic and social investment. Because
Indian planning does not objectively calculate the social profitability
of individual projects conceived in response to their goals and ob-
jectives, it is not possible to choose consistently the best alternatives
in selecting the size or composition of an investment program. Proper
planning would require that a cost/benefit analysis of individual
projects be made. Return on various projects, once measured, would
indicate whether a particular deployment of resources would or would
not lead to an increase in available resources. Maximizing returns, for
example, would increase income and aid in overcoming limited ab-
sorptive capacity. But social welfare considerations may be important
also. Including social welfare would give proper weight to projects
which maximize welfare for the greatest number of people. What is
I Since 1965 EDA and HUD spent $6.78 million on planners and studies on the 32 reservations.





20


important is that reservation cost/benefit analysis chose projects from
among measured alternatives. As an example of cost/benefit analysis
in a reservation context, readers are referred to the appendix by Fitch
and Trosper.
ANALYSIS OF RESERVATION PLANNING
Considering the above, EDA and HUD plans were analyzed to
determine whether or not they could properly be termed as plans
which could govern the selection of the best projects consistent with
goals.
GOALS AND OBJECTIVES
Generally, most reservation plans stated goals and objectives which
could be quantitatively defined and measured. None of the plans
attempted to relate objectives to broad goals.

CURRENCY OF DATA
Most plans used current data when they were written, although with
passage of time the data has become old and therefore less relevant.
AMOUNT OF DATA
The number of statistical items collected is the amount of data.
Some plans presented great quantities of data in many areas. These
plans tended to be more comprehensive. Other plans presented less
data but still managed to cover many diverse areas. While others
presented great quantities of data in just a few areas, many presented
very little data at all. In general, HUD plans tend to have more data
than EDA plans. HUD plans were also more often the product of
consultants than of resident Indian planners. On the whole, very little
data was presented irrespective of whether they were EDA or HUD
plans. Lack of data is a major flaw in many plans.
ADEQUACY OF DATA
It was necessary to determine whether data provided on a given
subject matter basis was sufficient to make judgments about projects.
Data in most plans read would be insufficient for making decisions
based on usual methods of analysis. HUD plans tended to provide
more detailed data than did EDA plans. Generally speaking, the
data was so inadequate as to make it difficult to select projects. Yet
the plans did so. Indequacy of data is a major flaw in the plans.
DATA RELATION TO PROJECTS
In general, none of the plans really attempted to relate the data
collected to the projects listed in the plans. HUD plans tended to
have more detailed data collection, and when HUD plans did relate
the data to projects, it did so better than EDA plans. EDA plans
had less data collection, and therefore failed to relate data collected
to projects selected.
ANALYSIS OF COMPETING PROJECTS
The (lata base in reservation plans is generally so poor as to .make
analysis impossible. Furthermore, the plans do not employ any form







of cost/benefit analysis to determine project priorities. Occasionally,
time-lines are employed to indicate the existence of a planning
strategy, but the "plans" never revealed any analysis indicating
why certain projects were selected, nor why some projects came first
in time.
HUD plans had more data which could have been used to analyze
various project possibilities, but these plans were weak on analysis of
data as well as upon competing projects. EDA plans had less data but
more analysis was attempted.
CITIZEN PARTICIPATION
Citizen Participation is required by EDA and HUD in the formula-
tion of plans. In general, EDA plans appeared to have had greater
input by the community than do HUD plans. This may be due to
several facts. EDA plans are, for the most part, written by "resident"
planners, while many of the HUD plans were written by Consulting
firms. EDA plans require overall Economic Development Program
committees, while HUD plans do not require any citizen committees,
per se.
COMPLIANCE WITH STATUTORY REQUIREMENTS
Since all the plans studied were found acceptable by HUD and
EDA, it must be assumed that they met agency guidelines. EDA
guidelines are vague and topical. They do not appear to require
more than that the blanks be filled in. By contrast, HUD guidelines
are quite detailed and do require specific information for required
planning activity sections: housing and land use. However, most
HUD plans present extremely inadequate information on land use
and housing. It is the exception to find a plan with more than three
pages constituting the housing or land use element. Further, although
HUD requires that environmental assessments be made, only two
Indian plans appeared to comply. Considering Indian plans in the
context of statutory requirements and agency guidelines, and con-
sidering the fact that these plans have been found to be acceptable
by HUD and EDA, one must conclude that these agencies are more
concerned with polished topical formats than they are in content.
CONCLUSION
Indian planning does not objectively calculate the social return
on individual projects conceived in response to their data collection.
No cost/benefit analysis of projects is made, making it impossible to
select the best alternative. Reservation planning amounts to data
collection without analysis. The plans are collections of base line data
with project lists attached.
The major reason that reservation plans are not plans is the attitude
of tribal councils and federal agencies; both view the planning process
as a requirement that must be complied with to obtain federal project
funding. This attitude is supported by the stress of the Federal
Government on format of the plan, rather than on its content or
methodology. Further, the fact that government agencies will accept
practically any work product submitted by an Indian reservation
indicates that the plans really are only documents of qualification.
Both views reflect the realistic recognition that Indian plans are
grantsmanship.






22


As a consequence of this recognition, plans are written in a per-
functory manner. Since it is not possible to know at the time the
plan is written what projects the Federal Government will fund, it
becomes incumbent upon the planners to write plans which are vague
or ambiguous. Vagueness produces flexible documents under which
practially all current and future projects will qualify. Grantsmanship-
planning demonstrates that reservations and federal agencies have,
as yet, failed to grasp the significance between planning as merely a
preparation for applications to a government agency, and planning as
a method to maximize social welfare.
C. CURRENT METHODS OF USING INDIAN RESOURCES
From the point of view of Indian income, current methods of
resource use on Indian reservations are subject to two general ob-
jections. First, Indians are mere rent-receivers with diminished
bargaining power. Second, Indians are not able to expand their share
of the return from their resources by investing it in resource processing.
This pattern results from the lack of control which Indians have over
their economy. In the field of resource use, the interference of the
Bureau of Indian Affairs between Indians and the management of
their land is the basic problem. This section will document the forms
of interference and the results.
Failure to move into processing has resulted from lack of capital
as well as lack of tribal control over resources. And, even when the
government has provided capital, Indian control has still been
minimzed. Consequently, most resources are exploited by non-
Indians through leasing. While in principle leases can be written to
protect the lessor's interest, in practice the lessor receives diminished
protection. Because Bureau leases do not adequately protect Indian
interests and because Indians generally may not execute leases on
their own behalf without Bureau approval, leasing is de facto sub-
mission to the dominant society.
C.1. LAND CONSOLIDATION
There is probably no more dismal chapter in Indian economic
history than the erosion of their land base. At the zenith of the
treaty period (1875), the tribal land base consisted of 165,929,710
acres.-' Between 1875 and 1887, 29,000,000 acres of this original
treaty area was ceded by the Indians as settlers continued to exert
strong pressures for more land (See Table 1). The ultimate blow to a
self-sufficient and contiguous tribal land base came in 1887 with the
passage of the General Allotment Act.2 The Act broke up tribally
held land into individual Indian allotments. When all Indian recipients
had received their allotments, the remaining reservation land area
was declared surplus and opened to homesteaders. Fortunately, the
allotment policy was not applied uniformly to all reservations and
some reservations' tribal land base remained intact (See Table 2).
The Allotment Act policy and subsequent sales of individual allot-
ments reduced the tribal land base to 29,481,685 acres in 1933.'
1 The Development of Federal Indian Relations 1775-1952, Department of the Interior, no author, no date.
2 For those unfamilar with the Act, read D.S. Otis; "History of the Allotment Policy."
J. P. Kinney, "A Continent Lost-A Civilization Won: Indian Land Tenure in America" (Baltimore,
1937) p. 351.













23


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25


The Depression was a factor in restoring some of the Indian land
base. As farmers went under, the U.S. Government bought their
land and later transferred it to the Bureau of Indian Affairs. More
important, however, was the Indian Reorganization Act which put
an end to the Allotment Policy on reservations in 1934. Reservations
thus, according to the books, regained an estimated 7.6 million acres
between 1933 and 1950.'
Table 2 separates the 32 reservations into those whose land was
allotted, and those whose lands were not. Among the first group,
tribal land as a percentage of total reservation land area, ranges from
a low of .01 percent to a high of 87.3 percent. In the second group,
every tribe possesses more than 90 percent of the reservation land
base.
Problems caused by allotment
The economic and legal problems that allotment and sale of indi-
vidual Indian allotments have caused have been adequately docu-
mented by the Meriam Report, 1928; by Congressional testimony
during the Collier administration; and by independent scholars such
as Peter Paul Dorner and Stephen Langone.5
Among the most serious problems caused by allotment is the
breaking up of the reservation into small uneconomical units. These
units are held by individual Indian allottees or they have been sold
to non-Indians. The problem is further complicated by the fact that
ownership becomes fragmented among divided-interest heirs, which
further reduces the amount of land any one such heir can use. A
"checkerboard" pattern of land holding among Indian allottees,
non-Indians and their tribe is the result. Economic use of the land
becomes impossible. Indian farmers and ranchers who are divided-
interest heirs cannot earn sufficient income from small land tracts.
Consequently, the land is used by non-Indians who can afford to
consolidate, by leasing a number of Indian tracts.
Dorner observed in 1957 that:
Indian allotments are useless except as a parcel to be combined with other
land for a sufficient sized livestock operation; for whereas 2500-3000 acres are
required in much of the Dakota country for an efficient ranch, the allotments
range in size from 160-640 acres. Hence, individuals continue to sell their allot-
ments, lease them to non-Indians, or permit them to lie idle.8
Checkerboarding also impedes the exercise of effective jurisdiction
by the tribe. There have been few instances where tribes have been
able to enforce law and order, zoning and building codes, environ-
mental codes, and water codes where Indian lands are interspersed
with non-Indian lands. In most cases, non-Indians vigorously reject
any type of regulation by the tribe. Clear jurisdiction over reservation
lands is necessary for a tribe to plan and control development. Land
consolidation is a prerequisite to a successful development program
and perhaps it is the most crucial prerequisite.
The existence of allotted land not only allows for inefficient land use,
leasing, and jurisdictional conflicts but also it contributes to the
gradual erosion of the Indian land base. There has been a shift in
4... P. Kinney, p. S51.
5 Peter Paul Dorner, "The Economic Position of the American Indian" (Cambridge, Harvard University,
1959). Stephen Langone, "The Heirship Problem and its Effect on the Indian, The Tribe and Effectual
Utilization" in "Toward Economic Development for Native American Communities," U.S. Government
Printing Office, Washington, 1969.
6 Dorner, p. 108.






26


ownership since 1934 from allotted land to fee patent and tribal land
as allottees sell out to non-Indians or the tribe. From the secondary
statistics available, it appears fee lands increased on ten of the fifteen
allotted reservations, (see Table 2, compare columns 4 and 9) and only
in three cases declined.
Land consolidation as a solution to checkerboarding: past attempts
"Land consolidation" means consolidation of already existing trust
land and previously owned trust land to form contiguous-economic
size units within the exterior boundary of the reservation. It does not
mean increasing trust land outside reservation boundaries.
Land consolidation was considered in depth by the Meriam Report
in 1928; it was the chief goal of the Collier administration; and it was
one purpose of the Indian Reorganization Act (1934).
If land consolidation has been recognized as a necessity for more
than 58 years, why has nothing been accomplished? To answer this
we must review the history of the Indian Reorganization Act.
Section 4 of the Act stopped the allotment procedure and the
issuance of fee patents to Indian allottees as well as sales by allottees.
Section 5 of the Act allowed the Secretary of the Interior to purchase
lands, water rights or surface rights to lands, within or without
existing reservations. For acquisition of such lands, Congress authorized
the appropriation of $2,000,000 annually, but no part was to be spent
for the Navajo. Any land acquired under this Act was to be placed in
trust.
From 1934 to 1974, only 595,154 acres were purchased under the
Act at a cost of $5,988,077.7 If one considers the fact that while the
BIA was buying 595,154 acres, the Bureau of Reclamation was
taking 1,811,010 acres, then land consolidation efforts were more than
offset by other federal takings. Not only was little land purchased
under the IRA, but also Section 4 was amended in 1948 so that the
Secretary could issue fee patents or approve sales upon the application
of the Indian owners. The Commissioner himself noted that such
pressures and the resulting alienation of land endangered the advance
made in the previous fifteen years.8
Appropriations under Section 5 of the IRA had virtually ceased by
1951, and the balance of the unexpended funds was transferred to the
Construction account.9 Given that some $84 million could have been
appropriated, what explains the Secretary of Interior's or the BIA's
reluctance to purchase land? According to Theodore Taylor, the BIA
was reluctant to seek the funds because of the termination mood of
Congress. The BIA decided that the atmosphere of the time did not
make appropriations of funds for land purchase a realistic op tion.0
If the BIA is an advocate of Indian rights, why was it unwi g to
pressure Congress to appropriate what it had already authorized?
The BIA is not and was not interested in land consolidation. An ex-
ample of the Bureau's past lack of interest is found in the following:
The Northern Cheyenne had sold cattle, and planned to invest proceeds in the
land so they could hold together at least part of the reservation. But the Bureau,
busy for months auditing the proceeds from the cattle sale, refused to delay the
sale until this money was available to the tribe. Secondly, the Bureau sold at least
7 Taylor, pp. 4-5.
l bid, p. 15.
Ibid p 40.
10 Ibid, p. 27.






27


one key tract, the loss of which jeopardizes the grazing economy of the entire
tribe. And as a final blow, the Indian Bureau refused to permit the tribe the
opportunity it requested to meet the price of the highest bidder.'
As a result of the reluctance of the BIA to request Congressional
appropriations, most tribes interested in land consolidation have been
forced to rely on loans. Indian tribes have obtained loans from the
Bureau's revolving loan fund and the Department of Agriculture.
The Farmer's Home Administration has been the largest source of
loans for land repurchase by tribes even though its land acquisition
program has only been in existence six years. To date the tribes have
borrowed $40 million. Usually tribes offer the land purchased, or a
guaranteed income, such as interest from trust funds, as collateral.
owever, in order to repay these loans, the tribe must put the land
into production. This usually takes another capital expenditure and
there is virtually no capital available for land improvements or ma-
chinery. Thus, if the land cannot be put into production rapidly enough,
the tribe might default.
Upon default, USDA can liquidate the loan through a foreclosure
sale. If the land purchased by the tribe was alloted trust land, the
land goes from trust status to fee patent, when foreclosed by USDA.
Therefore, securing loans with trust land is a risky method for attempt-
ing land consolidation.
There is yet another cause of the failure of land consolidation efforts.
Under the BIA, there is a standard provision in each Fiscal Year
Appropriations Bill to authorize expenditures of tribal trust funds.
Some Congressmen have placed restrictions on using these tribal trust
funds as well as on U.S. funds granted under the IRA or Construction
account for the purpose of land purchase. Currently in the States of
Arizona, California, Colorado, New Mexico, South Dakota, Utah and
Wyoming, Congress has restricted the use of government appropria-
tions under IRA or the construction account to acquire land outside
the reservation. Similar restrictions in Oregon, Nevada and Washing-
ton also restrict the use of government appropriations from purchasing
land inside or outside the reservation. In Nevada and Oregon tribal
trust funds are restricted for buying land inside or outside the reser-
vations.
Tribal trust funds often originate from timber, mineral and leasing
revenues. They are the proceeds earned from Indian trust land. Re-
stricting the free use of these monies perpetuates federal paternalism
and makes Congressional support of self-determination appear hollow
indeed. The purpose of these restrictions is clearly political, in that,
they protect the economic interests of non-Indians at the expense of
Indians.
Experience of the allotted reservations
Eleven of the sixteen allotted reservations said that allotment was
their major obstacle to development. Thirteen of the allotted reserva-
tions are actively engaged in land consolidation. The Rosebud Sioux
have had a Tribal Land Enterprise since 1943. Membership is re-
stricted to members of the tribe who place their lands under the opera-
tion and management of the enterprise. In return they receive certifi-
cates of interest equal to the appraised value of their land which
1 U.S. Congress, Senate Indian Land Transactions Memorandum of the Chairman to the Committee
on Interior and Insular Affairs, December 1, 1958; Washington, D.C., GPO; 2.






28


allows them to vote. The purposes of the TLE are to remedy fractiona-
tion of ownership, consolidate land, develop a management plan for
the members, preserve land values, facilitate land exchanges and to
develop tribal enterprises on tribal lands. The Rosebud Sioux have
.been able to obtain loans from RLF and from FmHA, but the latter
:allows the tribe to buy land only in Todd County. The tribe is con-
lesting this restriction.
The General Accounting Office conducted an investigation of BIA
land sales practices on two allotted reservations (Rosebud and
Cheyenne River) where land has been consistently passing from trust
to fee patent in spite of the tribal land purchase programs.2 According
to the Code of Federal Regulations, the BIA is supposed to follow
these procedures whenever land sales occur:
1. BIA is to insure that the sale is in the best long-range interest of
the owner.
2. Fair-market value is to be obtained.
3. The seller is to be advised he may retain his mineral rights.
4. The tribe is to be notified of pending sales of land owned by in-
dividual Indians so it may have an opportunity to purchase it.
GAO found that the BIA had not prepared statements that the
sales were in the long-range best interest. BIA officials admitted that
they had not prepared these statements and said it was because they
had no definition of long-range best interest.
In the land sales reviewed by GAO, 62% received the appraised val-
ue, 33% received more than the appraised value, and 6% received less
than the appraised value. More serious still was the fact that the
sellers were not advised of their mineral rights in 52 % of the cases!
Probably, the individuals would have elected to reserve them since
60% of the sellers who were informed of their rights elected to retain
them. Likewise, the BIA failed to notify the tribe of the sale in 27%
of the cases. Tribal officials at Rosebud and Cheyenne River said
that the BIA had not provided proper notification. In at least one
case at Rosebud, the tribe would have been interested in buying the
land.
The BIA's handling of land sales is another convincing proof that
the BIA has no interest in land consolidation. Furthermore, even
though land consolidation is a priority item for Rosebud and Cheyenne
River, their attempts are being thwarted by BIA procedures.
Other tribes such as Crow, Crow Creek, Ft. Hall, Standing Rock,
Warm Springs, Swinomish, and Umatilla have tribal land purchase
programs.
The Crows are in a particularly vulnerable position which is de-
scribed by Mr. Ray Bear Don't Walk:
There are over 100 applications for patent-in-fee land sales on file in the
Billings Area Office. There is a certain bill either to be introduced or pending in
U.S. Congress promoted by powerful white landowners and stockmen to get the
mineral rights for themselves on their lands in the Crow Indian Reservation. The
Crow Tribe or individual members must be given an opportunity to purchase
the lands when the individual allottees sell them. In order to perserve the dwin-
dling Indian holdings the Federal Government must adopt an augmented loan
program to the tribes for this purpose.1'
12 Comptroller (eieral of the United States, "Land Management Activities on Three Indian Reserva-
tions in South 1)ikota ('an Ibe Improved," Geineral Accounting Office, June 4, 1975.
Is Personal Conanuncation from Ray Bear Don't Walk, Sr., March 29, 1976.






29


The Crows have asked for the Secretary to declare a moratorium
on all land sales and would like to introduce a bill into Congress
allowing them to mortgage or hypothecate land income which they
could offer as collateral for loans for land purchase.
At Lac du Flambeau, 79 allotments have been offered to the tribe
for purchase. However, their annual income is small and does not
permit them to pay $1,070,400, the appraised value of the 5,574 acres.
Swinomish, by a special act of Congress in 1968, is permitted to
purchase and transfer to trust status lands on the reservation, lands
adjacent to the reservation, or lands in close proximity to the
boundaries of the reservation. However, they have practically no
funds and have been able to secure only a small loan of $36,000 from
FmHA. The Umatilla is one of those reservations where the state
has pursuaded Congress to restrict the Umatilla from using appro-
priated monies, including their own tribal trust funds, from buying
land inside or outside the reservation. The Umatilla have introduced
a bill into Congress to waive this restriction.
In spite of these restrictions the Umatilla are pursuing a land pur-
chase program. They are using their profits (which are not restricted
since they are not "appropriated funds") from their tribal farm to
purchase land. Few tribes have been as successful in regaining former
tribal lands as the Colville Confederated Tribes. However, even they
have been restricted by outside non-Indian interests. Public Law
84-772 restored 818,000 acres to tribal ownership. It also authorized
land purchases for the purpose of land consolidation. However, if
non-Indians are involved, the Board of County Commissioners in
which the land is located must consent before such non-Indian land
may be acquired by the tribes. The tribes and individual tribal mem-
bers own 20,000 acres of fee patent land because the counties will
not approve the transfer of this acreage to trust status.
It is possible to estimate the funds needed in 1975 by each allotted
reservation in our survey, to buy allotted lands (See Table 3). If these
figures are compared with the loan money available to them (Table 4),
it was clearly inadequate.
Consolidation estimates can be developed for the cost of acquiring
all allotted land on all Indian reservations. That figure is $1,497,927,-
999, approximately $1.5 billion. As an order of magnitude, it is not
an unreasonable sum when it is compared to other uses of federal money.
Outlook for future land consolidation
The outlook for land acquisition is dim, largely due to the current
procedures and the attitude of the BIA. Recently OMB and Con-
gress requested that the BIA prepare a "land study" which would
describe existing Indian lands, forecast needs, and set limits upon
future acquisition. The BIA took the position that such a study
would not be useful because it could not anticipate tribal needs
accurately! In any case the BIA is in no position to anticipate tribal
needs because it has neither an adequate data base nor a qualified
planning staff. Moreover, in the absence of knowing what the tribal
need is and will be, the BIA independently decided to formulate a
land acquisition policy. This land acquisition policy is not to guide
the use of any new appropriations from Congress but merely to set
guidelines for Secrerarial approval of tribal land purchases financed
by their own tribal funds or outside loans. In other words, even when










TABLE 3.-ESTIMATED CURRENT VALUE OF ALLOTTED LAND ON SOME RESERVATIONS

(1) Grazing (2) Dry farm (3) Irrigated (4) Commercial timber (5) Noncommercial (6) Total
timber
Reservations Acres I Value Acres Value Acres Value Acres Value Acres Value Acres Value Yea r

Cheyenne River -------------------- 456,048 $31,850,392 19,085 $772,560 --------------------------------------------- 3,319 $547,560 484,299 $33,170,512 --------
2 ($69.84) 2 ($40.48)------------------------------------------. 2 ($60)----
Crow Creek--------------------59,133 4,129,848 5,582 225,959 310 $130,026----------------------- 518 31,000 65,543 4,516,913 1975
($69.84)--- --------($40. 48)---------($419.44)-----------------------------($60).
Rosebud -------------------------- 414,907 28,977,104 57,130 2,312,622 400 167,776 ----------------------988 59,280 473,425 31,516,782
($69.84)--------($40.48)---------($1.4-----------------$0
Standing Rock------------------435,716 30,430,405 44,216 1,789,863 -------------------------------------9,947 596,820 489,879 32,817,088
($69.484)---- --- ($40.48) ----------------------------------------------($60)
Crow-- ---------------------946,211 41,491,352 193,523 21,351,292 28,883 3,739,482 23,124 $16,186,800 14,371 2,874,200 1,206,112 85,643,126
($43.85)-----------($110.33) ---------($129.47)------------($700)-($200)
Lac du Flambeau-------------------------------------------------------------------12,793 1,023,440 600 30,000 13,393 1,053,440 1975
.............($86)..........--..($50)------------------------$86---5-
Nett Lake ------------------------------------------------------------------------ ,912 872,960 933 46,650 11,845 919,610
....................................................... ($86) -------------- ($50) -------------------------------------------- C4
Fort Hall----------------------139,709 14,746,284 27,234 8,420,752 61,383 26,241,223 890 623,000 ------------------229,216 50,031,259 1975
($105.55) -----------($309.20)---------- ($427.50)------------($00-----------------------......-----.... --,-, ---.....
Spokane -------------------------- 11,052 340,401 1,977 427,961-------------------20,482 20,482,000 927 185,400 16,024 21,435,762 1975
($30.80) -----------($216. 47) ----------------------------- ($1,000) ------------- $ 20------------------------
Unatilla----------------------34, 476 1,0 61,860 27, 408 5, 933, 009 360 129, 016 5,144 5,144,000 285 57,000 67,673 12,.324,885 -----
($30.80)----------($216.47) ---------($358. 38)-($1,000)-------------($200)
Warm Springs-------------------58, 246 1,793, 976 5, 740 1,242, 537 967 346,553 10, 504 10, 504, 000 3, 031 606, 200 78, 488 14, 493, 266 --------
($30.80) -----------($216.47)--------- ($358.38)----------($1,000)
Chehalis -------------------------------------------------- 73 15,802 --------------------- 1,469 1,469,000 -------------------1,542 1,484,802
-----------------------------------------($216.47)--($1,000)--------------------------------------------------
Swinomish --------------------------------------------------------------------------------------------- 2,929 2,929,500 ------------------- 2,929 2,929,000
----------------------------------------------------------------------- ($1,000) ----------------------------------------------------------
Colville-----------------------34,875 1,074,150 62 164 13,456,641 2,667 13,341,053 37,226 22,335,600 -------------------- 136,932 50,207,444--.------
((30.80) -----------($21.47) ($358.38) ------------ ($600) --------------------------------------------------------------------

The acreages were obtained from the (1974) 50-1 land use form for each reservation, unless 1975 Note: There is a discrepancy between acres in col. 6 and allotted acres in col. 7, table 2,
is noted. because the former is based on BIA data and the latter on more recent task force questionnaire data.
2 The prices per acre were developed by adjusting Stephen Langone's 1960 area prices to 1975
levels by using a farm real estate price index for grazing, dry farm and irrigated land. (See Langone, A more complete study would collect current 1975 real estate values instead of adjusting
pp. 532, 533, 534). Langone's figures to reflect price changes between 1960 and 1975.
3 The timber prices were obtained from the area offices.








TABLE 4.--FUNDS SPENT ON LAND PURCHASE 1934-75, COMPARED TO CURRENT COST OF LAND CONSOLIDATION
ON 13 RESERVATIONS

IRA Appropriations I Tribal funds 2BIA loans 3 FmHA 4 Total cost

$412,842 $3,739,955 $4, 185, 000 $10, 826, 000 $330, 543, 889

I Taylor, appendix, pp. 59-83.
Task force No. 7 questionnaire.
3 BIA Division of Credit and Finance, December 1975.
4 Farmers Home Administration, June 1976.
TABLE 5.-COST OF CONSOLIDATING ALL ALLOTTED LAND

Type of land Acres I Price in 1975 Total values

Grazing ------------------------------------------ 7, 220, 040 2 $71.14 $512,622,840
Dry farm ---------------------------------- -------- 1,416, 361 2309. 20 437,655, 549
Irrigated -------------------------------------------------- 377,156 2 419.44 158, 028, 364
Forest:
Commercial ------------------------------------------- 516, 075 3 560.00 289, 002, 000
Noncommercial ------------------------------------ 522, 853 3 182.00 100, 619, 246
Other ----------------------------------------------------- 140,621 --------------------------------
Total ----------------------------------------------- 10, 223, 106 --------------1,497, 927, 999

1 Acreage was obtained from 1974 50-1 form.
2 Prices were obtained by adjusting Stephen Langone's 1960 prices for different types of Indian land to reflect 1975 values.
(See Longone, p. 532.)
3 Prices were obtained from the area offices and averages were calculated for commercial timber and noncommercial
timber.

the BIA has no active purchase program, it is setting policy to control
the tribal land purchase programs.
The policy identifies four classes of land and proposes that acquisi-
tions in each category be analyzed separately. The categories are
(1) unintentionally alienated lands, (2) submarginal lands, (3) lands
set aside for permanent retention and management for public purposes,
and (4) all other federal and privately owned lands.
This last category includes lands within, adjacent or near reserva-
tions which tribes might wish to acquire, including allotted, unreserved
public domain, surplus, or privately owned lands. The most contro-
versial guidelines for acquisition pertain to this category. Basically,
the Department of Interior will support transfer of lands to Indian
tribes when these conditions are met:
1. The transfer will contribute to a tribe's economic development objectives
as these are expressed in an economic development plan.
2. The expected beneficial contribution of transfer substantially outweighs
the social and economic costs of acquisition.14
With regard to this first condition we have already discussed the
fact that Indian tribes design inadequate plans and that the BIA
has no staff to evaluate transfers in the light of tribal plans. As for
the second condition, who is going to do the cost/benefit analysis
of the transfer? Again, the Bureau has no expertise.
The memo continues with a detailed outline of what the benefits
mght be:
1. Creation of employment; reduction of unemployment.
2. Nature and amount of capital investment anticipated, its multiplier effect.
3. Impact on individual income, tribal income, rental or lease revenue expected.
4. Whether planned use will expand an existing economic venture which has
been successful.

14 Memorandum from Acting Assistant Secretary, Program of Development and Budget of Interior,
Stanley Doromus to the Commission, Bureau of Indian Affairs, February 19, 1976.







32


5. Whether the planned use will enable a greater economic return to the tribe
than is realized currently.
It will be extremely difficult to project the effect of the acquisition
or employment since there are no adequate statistics on employment
to measure marginal changes. Further, how can a multiplier even
be calculated given the absence of a data base? To calculate a regional
multiplier for a reservation one needs to know much detailed informa-
tion about personnel expenditures and about supply sources. The
Bureau does not have this data.
Under costs the Department cites:
1. Displacement of non-Indians.
2. Creation of unemployment (among non-Indians?).
3. Creation of a land ownership pattern which results in parcels that are difficult
to use (difficult for whom?).
4. Whether the planned use would result in loss of a scarce natural resource,
destruction, or non-development.
5. Whether planned use would be incompatible with use of adjacent lands in
non-Indian ownership.
6. Whether planned use would have detrimental environmental effects.
7. Whether the transfer would block access to public land.
8. Revenues forgone by federal government, state government, local government.
9. Whether existing public use would be eliminated.
It is very clear that the Department is comparing Indian benefits to non-
Indian costs, rather than total benefits (Indian and non-Indian) to total costs.
However, in a free market economy, the only comparison that is relevant is the
cost of the land to the purchaser versus the benefit to the purchaser. One assumes
that the sale price adequately compensated the seller; after all, the sale was volun-
tary. Therefore, to list "displacement and unemployment of non-Indians" as costs
is ridiculous since the sales price should have compensated them.
However, there are certain external costs which might be imposed on others,
but in a free market economy, bystanders usually have no recourse. The external
costs are the loss of tax revenues and loss of access to public lands. Tax loss occurs,
of course, only when fee patent land is purchased. The fact that the Department is
concerned with federal and state revenues demonstrates a conflict of interest on
their part and an inability to always promote Indian economic development.
As for other "cost" considerations, who is to judge what is destruction of a
scarce natural resource? Does the Department have the right to dictate the type
of development that is to occur on Indian lands when they have no concept of
development? As long as the tribe can meet its loan payments this should be
sufficient.
Summary and conclusion
This section has discussed the need for land consolidation and the past and
present obstacles to such consolidation. It has also given reasonable cost estimates
of such a program. Given the past and present reluctance and inability of the
Bureau to pursue such a program, the Task Force recommends a new appropriation
of at least $2 billion for land purchase which would be administered by the Indian
Development Authority.
C.2 INDIAN AGRICULTURE
This section seeks to examine the importance of Indian agriculture; the present
method of using Indian agricultural lands; the return to such uses; abuses under
the present system; and obstacles to Indian participation in agriculture.
Importance of Indian agriculture
According to 1974 BIA statistics, 2,440,172 acres, or 4.7% of all Indian trust land,
was classified as agricultural. Of the almost 2-,2' million acres, 29% were irrigated
and 71 % were dry farm. While the size of Indian agricultural lands seems small,
the value of products grown was considerable: $339,919.780.
However, 73% of this value was produced by non-Indian operators. Part I of
the 50-1 forms shows that non-Indian operators usually cultivate 63% of all
Indian agricultural lands, while Indian operators cultivate 29% and 8% remains
idle.' Table 1 shows the gross value of products grown and the actual number of
acres used to grow such products.

ICalculatioMs based on 1974 BIA 50-1 form, Part I, for total Indian land in agriculture and use by. Indian
or non-Indian. Part VII for value of products grown.








33


TABLE 1-INDIAN AGRICULTURAL LANDS USED BY INDIAN AND NONINDIAN OPERATORS AND GROSS
VALUE PRODUCT, 1974

Type of land
Dry farm Irrigated
Gross, value, Gross return Gross value, Gross return
Operator Acres product per acre Acres product per acre

Indian ----------------- 564,630 $38,643,144 $68 70, 998 $24, 493, 041 $344
Non-Indian ------------ 936, 649 111,617,105 119 247,047 134,891,467 460

Source: 1974, 50-1 form pt- Vii. Indian dry farm acreage--col. 2 and 4, rows A, B, D; non-ldnian--col. 12, rows A,
B, D. Indian dry farm gross value-col. 3 and 5, rows A, B, D; non-Indian--col. 13, rows A, B, D. Indian irrigated acreage-
col. 6 and 8, rows A, B, D; non-Indian-col. 14, rows A, B, D. Indian irrigated gross avlue-col. 7 and 9, rows A, B, D;
non- Indian--col. 15, rows A, B, D.

One is immediately struck by the fact that the non-Indian operator
not only cultivates the bulk of Indian lands, but that his gross return
per acre is higher. This is probably due to the fact that Indians have
never had the capital or technology to properly farm their land. Their
undercapitalization has forced them to lease their lands to non-Indians.
The situation is virtually the same for the ten reservations having
the most agricultural land out of our sample of thirty-two. Table 2
illustrates who operated the land, both dry farm and irrigated.
According to a 1974 GAO study at Fort Hall, the chief reason for
not participating in high-dollar yield farming (irrigated) was that
Indians (1) could not obtain credit, and (2) lacked a knowledge of
farming technology.2

TABLE 2.-TYPE OF AGRICULTURAL LAND AND OPERATOR

Reservations
Agricultural land (acres) Irrigated land Dry farm land
Agricul-
tural
land as
percent
of total Non- Non-
Dry trust Indian Indian Indian Indian
Reservation Irrigated farm land operator operator Idle operator operator Idle

Crow Creek 271 10,291 10 150 121 ---------- 3,973 6,318
Percent ------------------------------------- 55 45 ----------- 39 61
Crow-----------30,287 200,761 15 2,754 27, 533 ------- 29,130 171, 631
Percent ------------------------------------- 9 91 ----------- 15 85
Standing Rock.... 300 58,287 7 300 0 ----------13,721 44, 566
Percent--------------------------------100 0 24 76
Omaha ------------0 17,275 63 0 0 ---------- 1,699 15,361 215
Percent -------------------------------------------------------------------- 10 89 1
Rosebud --------- 900 81, 464 9 0 100 800 18, 518 62, 431 515
Percent ------------------------------------- 0 11 89 22 77 1
Fort Hall--------81,474 31,769 22 10,780 56,033 14,663 1,855 29,914
Percent --------------------------------- 13 69 18 6 94 ----------
Umatilla-------- 360 28,661 34 0 360 0 1,507 26,914 ---------
Percent ------------------------------------- 0 100 0 5 94 1
Duck Valley------ 8,000 0 6 6,455 78 1,467 -----------------------------
Percent---------------------------------81 1 18
Fort McDermitt.._ 3,500 0 9 2,853 0 647 -----------------------------
Percent ------------------------------------- 81 ---------- --19 ----------------------
Moapa ----------- 550 0 47 500 0 0 -----------------------------
Percent ------------------------------------- 100 --------------------------------------------------


The Indian farmer has three sources of credit: commercial banks,
Farmers Home Administration and the BIA Revolving Loan Fund.

I Report to the Subcommittee on Indian Affairs Coinmittee on Interior and Insular Affairs, U.S. Senate,
"Land Leases on the Fort Hall Indian Reservation in Idaho," General Accounting Office; May 31, 1974;
pp. 16-17.






34


Both commercial banks and the FmHA require acceptable collateral,
-and GAO reported that they were reluctant to accept Indian land
because of its trust status. In reviewing new BIA revolving loans
made during FY 1975, it appears that the bulk of the individual loans
-were made for other purposes-housing in particular. (See Table 3).
The technical assistance available to Indian farmers is supplied
through a cooperative BIA-USDA effort. Under a Memorandum of
Understanding between the Extension Service and the BIA, the
Extension Service provides "leadership and direct assistance to
State Extension Services in planning, conducting, and evaluating
extension programs in those states where the BIA has contracts with
state extension services." Funds for this work are transferred directly
from the BIA to the State Extension Services.
TABLE 3.-Distribution by type of new BIA revolving loans to individuals, fiscal year
1975
Type of loan: Percent
Agriculture.---15. 9
Farming---------8.4
Livestock-- .---------------------------------------- 7. 6
Business enterprise_--_-22. 7
Consumer credit----- 11. 3
Education--------0.4
Fisheries---------1. 3
Land- -5. 8
Housing ------------------------------------------------ 34. 6
Refinancing---7. 9
Total percent-99. 9
Total_- -- -- -$15, 315, 532
However, USDA officials have complained that the actual amount
of technical assistance provided has declined in recent years because
the BIA is reluctant to seek increased appropriations. The extension
budget has remained small and virtually constant since 1971.
Extension Service BIA Funds Directed to State Extension Services
1971 -- -$1,748,331
1972- --1,877,232
1973-- -- --1, 732, 737
1974- --1,695020
1975 --------------------------------------------------- 709, 633
Source: USDA.
The nature of fiscal funding makes job security uncertain for
extension agents. This affects the quality of personnel that work in
the program. For most, it is a temporary job. USDA would prefer
direct appropriations. This would increase the level of funding and
promote job security. Ultimately, the funds should be given directly
to the tribe so that they may contract with those who will supply
the best technical assistance.
Leasinrg
Uneconomic size plots, lack of capital and technical assistance
force Indians to lease their land to others. The BIA has long favored
this situation, believing that allotment, heirship, lack of capital and
technology, and the supposed Indian dislike of agriculture compared
to ranching were insoluble problems. Dorner found that BIA o cials






35


readily admitted that "a large share of the Indians' land is leased
because land is better used by non-Indians, or the land realized its
full potential under non-Indian operation but not under Indian
operation." a
The BIA's preference for leasing keeps it from designing an agri-
cultural development program. As a result, lack of capital and tech-
nology continue to plague Indian farmers and the BIA continues
its leasing activities. In 1958 Dorner found:
There are no plans to speed up the development of irrigable land. There is no
program to get Indians established on sufficient-sized units. There is no program
to solve the problems of land, management, and inadequate credit for under-
taking development. Nor are such programs being planned.4
Leasing has not only caused the postponement of agricultural
development, but also has resulted in three additional problems: (1)
Some Indians are losing permanent control of their land (2) Rent
per acre is substantially less than comparable non-Indian land, and
(3) Soil is depleted by non-Indian farmers who do not observe proper
conservation practices. To illustrate the full force of these problems
two case studies are offered: Crow Competent Leasing and Leases
on the Fort Hall Reservation.
Crow competent leasing
A competent lease is a five or ten year lease of allotted agricultural
land in which the rent is prepaid for the entire term of the lease. For a
given piece of land, the first five year period was paid in a lump sum
when the land first went into competent lease status. Subsequently,
once a year the current lease is cancelled and a new one written, with
payment of rent for the last year of the new lease discounted to the
present. December is the most usual time to cancel and rewrite the
leases.
The Crow allotment act defined "competent," but its concept was
not clear until 44 Stat. 658, which allowed the leasing of the lands of
competent Indians and their minor children, was passed.
The BIA's role is recording of leases. As long as the allotment is
owned by five or fewer people, a competent lease is valid. If an allottee
or a group of owners wishes to regain control of its land, he must wait
five or ten years. For poor people, this can be a long wait. Further, for
many of the leases, and particularly for range land, even after the five
year period there would be only one potential lessor. Many of the
lessors are large operators who lease land from many Indians. Many
own fee patented land interspersed among Indian allotments which
they lease.
The five or ten year limitation arose from the Act defining the term
"competent." A competent Indian can lease his land without inter-
ference or assistance from the BIA.
It appears that the national policy stopping "forced patents"
limited the ability of ranchers on the Crow reservation from obtaining
Indian land. Thus, the system of obtaining fee patents was modified,
but continued to use the same terminology regarding "competence."
Astute Indian lessors did not apply for competence, since they would
become vulnerable to non-Bureau controlled leases. While they would
ostensibly be "free" to supervise their own leases, they would have no
I Dorner, p. 218.
Dorner, p. 179.






36


resources with which to do so, and no courts or administrative agencies
to enforce the leases they wrote. In 1949, a law making all children of
competent Indians competent, also included adults who did not
want the status! Thus, the "forced" aspect of this system did not
occur until 1948-1949. Both the 1926 and 1948 laws used a compe-
tency commission.
In June, 1975, 868,281 acres of 1,205,926 acres of allotted land were
under competent lease. This is 72% of the allotted land. Recent de-
velopment use of the land is illustrated in Table 4. This table shows
the following:
(1) Between 1952 and 1962, 22.5% of all allotted land acreage was
transferred to fee status. Twenty-three and one-half percent compe-
tent leases were so transferred. After 1962, the rates of transfer
changed; mostly allotted land not under competent lease was alienated.
The rate slowed to 7.9% for all allotted land, and 0.3% for land under
competent lease. Thus competent leases slowed the alienation of
allotted land.
(2) The range unit system of managing grazing land was replaced
by competent leases. This is undoubtedly the key to understanding
the way in which allottees were forced to start the annual cycle of
cancellation and renewal. If lands were transferred from range units
to competent status in the middle of a permit period, ranchers with
permits could negotiate with individual allottees without competition
from other ranchers.
TABLE 4.-LEASES OF ALLOTTED LAND, CROW RESERVATION
December March June
1952 1962 1975
Trust allotted land (acres)-1,690,411 1,309,313 1,206,111
Office leases.-135, 663 265,415 (1)
Office permits (range) ------------------------------------------ 240, 792 1 (18, 996) --------------
Competent leases:
Total, competent leases ------------------------------------ 1,140, 362 871,865 868,865
Grazing land:
Total --------------------------------------------------- 1,054, 411 737,106 NA
In range units ------------------------------------(802,230) (13,157) NA
Dry cropland ----------------------------------------- 62,125 102,694 NA
Irrigated cropland -------------------------------------- 23,827 32,065 NA
Figures in parentheses are for 1961 rather than 1962.
Sources: Missouri River basin investigations project, "Leasing of Indian Trust Lands on Crow Reservation, Mont, with
particular reference to Competent Leases," Billings, Mont., September 1963. (Report No. 170). Bureau of Indian Affairs,
Crow Agency, "Annual Report of Caseloads, Acreages under BIA and Surface Leasing," June 30, 1975. (Form 5-152).
(3) There was an increase in dry cropland under competent leases.
Once this system is in place and operating, Indians have no way out.
The keys to the system's stability lies in the relationship between
the large scale of the lessee's operation and the poverty of his lessors.
Further, the fact that lessors have no real alternatives contributes
to the cancellation-renewal cycle.
Such leasing constitutes a partial alienation of allotted land. Com-
petent leases can be used as collateral for loans, while trust land can
not. This feature depends upon the existence of an assignment clause
in the lease. Since Indians use competent leases as collateral for loans,
such leases provide a method of financing, without which, Indians
might otherwise feel forced to sell their lands.
What is the impact on Indian income? Assuming that the alterna-
tive to competent leasing would be office leasing (the normal BIA






37


practice), the competent lease rates would be adjusted upward using
rental data. This is a major assumption. An alternative might be
sale at a discounted price, due to the fact that only the lessee is willing
to purchase land under a competent lease.
Based on this assumption, it is estimated that income, using office
lease rates rather than competent lease rates, would be $899,849. The
estimate would be higher if competent lease rates of $0.76 were
compared to the rental rates of fee land, rather than office leases for
which the average rate is $1.65.
What is the significance of the competent lease situation for our
recommendations?
(1) If the original intent of the Competent Lease Act is to assist
the Crows, then it is a good example that helping is difficult. The
ability to collateralize because of the assignment factor in competent
leases reduces impoverished Indian lessors to debt peonage. As the
law was interpreted, the BIA left Indian lessors vulnerable to the
unequal bargaining power exerted by powerful lessees, without
concern for the strategic position of the Indians.
(2) Economic and political power are important. The lessees
cooperate among themselves and have professional legal assistance.
Indians are the weaker group in a competitive bidding situation. The
fact that lessees are rich means that they can exert greater bargaining
power in any market battle with the lessor Indians.
(3) The Crow Tribe wants some help with the situation. But such
aid must be cautiously given. The Crow are very interested in pro-
tecting their sovereignty. Land under competent leases remains
"trust" land, although it is heavily encumbered. Actions which cause
sales of allotted land would be dangerous.
Land leases on the Fort Hall Indian Reservation
Since 1973, a controversy has raged at Fort Hall over a finding by
the Economic Research Associates of Los Angeles, consultants for
the tribe's overall economic development plan, required by EDA.
They found that Fort Hall Indians failed to get equitable income for
all agricultural land leased to non-Indian tenants. Typical non-
reservation leases in the Fort Hall area averaged 35 percent of gross
crop value, while Fort Hall leases were equivalent to about 2.3 percent
of gross crop value.
This funding caused the tribal council to request the Secretary of
Interior to investigate the BIA Land Operations Office at Fort Hall
for inequitable lease rates. In response, GAO conducted an investiga-
tion and found that ERA was guilty of sloppy research procedures,
but they had arrived at the right conclusion: there was a large dis-
parity in lease rates. The GAO calculated a $60 per acre disparity
between the net income (rental) earned by irrigated reservation land
as compared to the net income (rental) earned by nearby irrigated
non-reservation land.5 The actual differences were as follows:
TABLE 5.-NET INCOME
Reservation Nonresreva-
Type land tion land
Irrigated (per acre) ------------------------------------------------------------ $15.36 $75.41
Dry farm (per acre) ------------------------------------------------------------ 9.84 9.73
Pasture (per animal unit)- 1.74 1-4.50


6 Land Leases at Fort Hall, pp. 11-12.






38


However, GAO went on to justify the $60 disparity by the fact
that non-Indian operators incurred certain tangible and intangible
costs when using Indian land. These costs make the non-Indian
operators less wilng to pay the same rent as for non-Indian land.
They calculated the tangible costs at $20. However, GAO was not
able to quantify the "intangible costs" and so did not account for
the remainiyg $40 disparity.6
In 1975, another firm, Farm Management Company, did another
evaluation of leasing at Fort Hall. They calculated the value of cash
leases for both high quality and average quality non-reservation land,
thus taking into consideration the tangible costs raised by GAO,
and compared them to the value of cash leases for the same quality
land on the Reservation.
TABLE 6.-VALUE OF CASH LEASES
Nonreservation land Reservation land
High quality Average quality High quality Average quality
Potatoes Grain Potatoes Grain Potatoes Grain Potatoes Grain
Value of cash lease ------ $64-$80 $40-$60 $26-$39 $9-$19 $35 $35 $35 $35
Average ---------------- 56- 70 ---------- 17-24 ----------35 -----------35
Source: Western Farm Management Co. pp. 52-53.
Since potatoes are normally rotated every other year with a gram
crop, the average cash rent is $56-70 on the better soils and $17-24
on the sandier soils. After the first reports of ERA and GAO, the tribal
council increased the standard rent per acre from an average of $15 to
$35 an acre. However, this fixed fee allows the better lands to stay in
farming at a bargain price while the poorer or marginal lands were
abandoned because of lower yields, greater fertilizer expense and
difficulty in irrigating this type of soil. Using standard lease rates for
the entire reservation has caused the tribe to receive less rent than it
7
should for better farmland and the poorer land is left idle.
Western Farm's criticism of a fixed rate rent raises another weakness
of BIA's leasing agreements. Whether leases are for agriculture,
minerals, or stumpage, payments have traditionally been fixed rate
agreements, rather than a percentage of the sales volume. Because the
BIA is not profit-oriented, and is a risk averter, Indian lessors continue
to receive low fixed rents or royalties while the market value of their
agricultural produce and minerals has increased.
Possibly, agricultural leasing should be based on crop share rents
(a rent which is an agreed percentage of the crops grown by the
tenant) instead of fixed cash rents. Only two reservations out of the
thirty-two had crop share rents. Of course, the crop share rents
system involves more monitoring and risk. Some one will have to
determine the exact yield of the tenant, and the lessor would share
gains or losses with the tenant depending on yields and market prices.
however, if Indian lessors want to realize the maximum return to
their land, they will have to be willing to assume risks. Probably,
Indian lessors have been reluctant to assume such risks in the past
6 Land Leases at Fort Hall, pp. 12-15.
T Western Farm Management Company, "Analysis of Present Leasing Practices" and the Effect on Rentat
Rates of Tribal Agricultural Land, funded by EDA, Technical Assistance Grant No. 07-6-01534, pp. 52-3.






39


because of their already low level of income. Therefore, they might
prefer low safe returns to higher but uncertain ones. However, the
Task Force has no proof to substantiate Indian preferences for risk-
taking.
Other standard leasing difficulties are inordinately long lease
periods, and no controls for soil conservation.
Western Farm noted that a five to ten year lease is of no benefit to
the Tribe because the type of improvements made by the lessee are
fully depreciated. They recommended a three year leasing agreement.8
If there are any violations of the lease, the only effective recourse
the Indian lessor has is not to renew the lease. This means that he will
have to wait out the entire lease period. Not one of the thirty-two
reservations surveyed reported effective and timely action by the
BIA against lease violations.
Western Farms also discovered that the lack of proper rotation
and cultural practices was leading to much erosion of the Tribe's
land resources. The standard rotation policies written into the leases
were not accomplishing the proper rotations and erosion controls.
In most of the leases there is a requirement for alfalfa to be seeded
before the land is turned back to the Indian owner. If not planted to
alfalfa a penalty of $25-50 per acre is assessed the lessee. Currently,
the cost of establishing a stand of alfalfa is $60-100 per acre. There-
fore, it is cheaper to pay the penalty.'
Jack Peterson noted in his study of Fort Hall:
While there is little disparity in lease income from dry land farming, there is a
disparity in land use and conservation practices between Indian and non-Indian
lands. Sheet and gully erosion wash thousands of tons of this valuable topsoil
into Fort Hall's once glimmering streams.10
Peterson went on to state that 16,000 acres of Ross Fork watershed
had been virtually destroyed by dry landing.
Leasing practices have provided Indian landowners with very
substandard returns for the following reasons:
Fixed rate rentals on Indian land are substantially less than
on non-Indian land.
Indian fixed rate rentals are preferred over crop share rental.
Indian lessors have no recourse when leases are violated.
Leases are for lengthy periods of time.
Lease regulations for proper conservation practices are unen-
forceable.
What is the alternative to leasing? On several of the sample reserva-
tions, particularly Umatilla and Crow Creek, tribes have consolidated
tracts of trust land and are farming it. This would solve a multitude
of problems. First, efficient-size units could be created. Second, the
tribe has better access to capital and technical assistance than do
individuals. Third, returns are usually higher than leasing and are
directly received by the tribe.
Crow Creek tribalfarm
At Crow Creek, the tribe has brought 1500 acres under dry farm
cultivation, principally alfalfa and winter wheat. It obtained funds
s Western Farm, p. 48.
V Western Farm, pp. 41, 44.
10 lack Peterson, Futures, A Comprehensive Plan for the Shoshone-Bannock Tribe, funded by a 701
Planning Grant, HUD, 1974, p. 14.


77-462-76-4






40

for land consolidation through FmHA and enterprise funds from EDA.
The tribe reported that these funds were still insufficient for complete
development of the farm. Eventually, the tribe hopes to have three
units of 2,000 acres each under cultivation. Fifteen hundred acres
would be irrigated. It is estimated that eight would be employed
full-time on the 60,000 acres, and many more through indirect sup-
portive industries. In 1975 the farm enterprise had a net profit of
$48,000 or $35 an acre. If this is compared to the gross cash rent per
acre ($16.89) usually received in South Dakota, probable return would
be more than doubled.'
Umatilla tribal farm enterprise
The Umatilla farm enterprise manages the Umatilla tribal farm
lands. The Umatilla obtained a loan from the Revolving Loan Fund
to purchase land to start the farm. Income derived from the land is
used to pay for land purchase loans, spraying, fertilizer, and related
expenses. Through 1976, the tribe had 1360 acres of land under culti-
vation which they hope to expand to 6000 acres. The farm enterprise
has generated a net income which exceeds the average net income
received by Umatilla lessors.
TABLE 7.-TRIBAL ENTERPRISE INCOME VERSUS LEASING INCOME
Total net income Average income
from tribal farm Net income received by
Year enterprise per acre Umatilla lessor
1973 ----------------------------------------- 77,357 $58.60 $23.13
1974 ----------------------------------------- 61,431 46.53 37.12
1975 ----------------------------------------- 71,910 52.87 34.08
Source: Superintendent, Umatilla Agency, Pendleton, Oreg., 1976.
Other examples
There are other examples of tribal agricultural development which
did not fall within our survey. Among the most exciting developments
is the Quechan hypodroponic farm. It demonstrates how the tribe
marshalled the necessary grants and loans to buy land and put it into
production using the latest teclmiques available.

C.3. INDIAN LIVESTOCK ACTIVITIES
Approximately 64 percent of all Indian land is classified as open
razing. Of the 33,282,203 acres so classified, 86 percent are used by
ndians; 13 percent by non-Indians; and 2 percent are idle. Unlike
agriculture, the bulk of land is used by Indian operators instead of
non-Indian operators. Nevertheless, non-Indian operators were still
more productive (see Table I).
TABLE I.-GRAZING ACTIVITIES: ACREAGE AND GROSS VALUE PRODUCT, 1974
Acres used in Gross value Gross value,
Operator----------------------------......1974 Percent product product per acre
Indian-----------------------------------39,569,133 89 $53,565,224 $1.35
Non-Indian --------------------------------- 5,099,413 11 35,188,583 6.90
Source: 1974, form 50-1, pt. VII.
It Farm Real Estate Market Developments Economic Research Service, USDA, July 1975, p. 34.















TABLE 1.-GRAZING ACTIVITIES ON SELECTED RESERVATIONS


Percent grazing acres used by-


Non-Indians


Carrying
capacity
in AUM's


Actual
AUM's on
range


Cheyenne River --------------------------- 92 8 0 584, 232
Crow ------------------------------------ 83 7 0 39,516
Crow Creek ------------------------------- 70 30 0 90, 516
Fort Hall --------------------------------- 31 69 0 68,179
Rosebud --------------------------------- 52 48 0 376,468
Standing Rock ---------------------------- 56 44 0 440, 848
Hualapai --------------------------------- 100 0 0 50, 496
Fort Apache ------------------------------ 100 0 0 219,532
San Carlos ------------------------------- 83 2 15 321, 552
Duck Valley ------------------------------- 94 6 0 63, 000
Fort McDermitt ---------------------------- 88 12 0 14, 200
Colville ---------------------------------- 72 28 0 92, 715
Warm Springs ----------------------------- 89 10 1 37, 416
Spokane --------------------------------- 86 10 4 13,530
Nambe ----------------------------------------------------------------------------- 1, 536
H avasupai ----------------------------------------------------------------------------------------


584, 232
41, 366
87, 864
60, 979
376, 110
440, 848
60, 564
203, 401
170, 040
54, 420
14, 400
93, 701
36, 569
13 530
1,169
504


907
805
286
596
1, 682
1,026
159
1,619
1, 163
192
81
963
412
315
73
79


28.0
5.0
6.0
8. 7
6.2
10.0
53.0
27.6
63. 7
38.0
31.0
12.9
32.0
14.3
23.0
32.0


85
38
17
35
35
85
223
364

125
132
45
--------------


Source: Col. 1 BIA 50-1 form pt. I, 1974; col. 2-3-4,7 Range Management Report, 1974; col. 5 BIA Labor Force Resident Population Figure for 1974 divided by 5; col. 6 is col. 4 divided by col. 5.


Indians


Number of
Indian
operators


Number of
families on
reservation
(5)


Percent
families
with
livestock
(6)


Range
techs.
(7)


Indian
operators
per tech.
(8)






42


This general situation also held true on those reservations in our
survey where livestock activities were important in terms of employ-
ment and land use. (See Table 11).
Again, the explanation for the differential in productivity could be
accounted for by different amounts of capital and technical assistance
which are available to Indian ranchers as compared to non-Indian
ranchers.
In fiscal year 1975 only 7.6 percent of the total value of revolving
loans to individuals were for livestock activities (see Agriculture
section). The revolving loan fund was really the only source of credit
for Indian ranchers because they were considered poor risks by local
banks and agricultural credit co-ops.
Our discussion of technical assistance in agriculture holds equally
for livestock activities. Column 8 of Table II shows how many Indian
operators each BIA range technician was supposed to be advising.
Lack of technical assistance results in poor management practices
by Indian operators. For example, Indian calf crops are generally
lower than non-Indian calf crops because non-Indians provide better
management during this crucial time.
Productivity is also a function of the size of operation. Table III
illustrates the fact that on 16 reservations, 79 percent of the operators
have less than 101 cows, 67 percent have less than 51 cows. These
operations are so small that they will not generate enough income to
support a family of five. It is generally agreed that any rancher needs
at least 200 cows minimum, in which case only 9 percent of the Indian
operators were potentially capable of earning an adequate income.
Operation size depends on the amount of capital and land to which
the Indian operator has access. The capital constraint has already
been discussed. If the carrying capacity of the sample reservations is
compared with the actual number of livestock, the range is grazed to
capacity. Thus there is also a constraint on land.
TABLE Ill.-SIZE OF OPERATIONS ON SELECTED RESERVATIONS
Total cows
Cattle
Reservation operators 0 to 50 51 to 100 101 to 150 151 to 200 201 to 300 301 plus
Cheyenne River --------------------- 256 16 57 59 37 69 19
Crow ------------------------------- 38 5 10 9 7 5 2
Crow Creek-17 4 2 3 0 6 2
Fort Hall -------------------------- 52 28 6 5 1 9 3
Rosebud ---------------------------- 105 6 25 28 15 16 15
Standing Rock ---------------------- 104 13 23 25 16 14 13
Warm Springs---------------------- 132 121 3 4 4 0 0
Spokane ---------------------------- 35 35 9 1 0 0 0
Iualapai-85 74 5 3 1 1 1
Fort Apache ----------------------- 447 368 52 10 3 11 3
Sanlos.------------------------ 729 688 30 2 5 3 1
Duck Valley ------------------------- 73 42 15 5 6 4 0
Fort McDermitt.-25 18 4 2 0 1
Colville..-124 61 38 11 6 7 1
Nambe---------------------------17 17 --------------------------------------------------
Havasupai --------------------------- 25 25 ..................................................
Total ------------------------- 2,274 1,521 279 167 100 146 60
Percent---------------------------67 12 7 4 6 3
Source: BIA Range Mangement Report 1974.
The only way to increase land available to Indians is to not lease
land to non-Indians. However, this is easier said than done. In many
cases, Indian tracts are surrounded by non-Indian ones and so they






43


are difficult to use. The only solution to increasing the size of Indian
operation is through land consolidation where such captive tracts
can be traded for others.
Probably the best solution is to manage a number of individual
operations jointly so that best use can be made of the scarce land,
capital and technical assistance.
Inequities in livestock activities
Besides low productivity, there are several problems which plague
livestock activities. They are inequitable grazing fees and illegal
subleasing.
Code 25 CFR 151 requires that the BIA administer grazmg priv-
ileges on Indian lands in a manner which will yield the highest returns
for the landowners consistent with sustained yield land management
principles. Usually, the BIA establishes the reservation minimum
rate for grazing on individually owned lands. This rate is supposed
to reflect the market value of grazing permits on comparable non-
Indian land. Individual owners may stipulate a rate above the BIA
minimum. The tribal governments may set rates on tribally-owned
land for Indian operators. Once all Indian operators have been taken
care of, BIA advertises the remaining grazing land which is leased
out according to competitive bidding. Table IV contains the grazing
rates per animal unit month on the reservations in our sample.
The first observation is that the BIA reservation minimum was
considerably below the high bid price and the average monthly rate
per head for private lands in the surrounding area. One wonders why
the BIA minimum rate was so abnormally low if they were supposedly
basing the rate on fair market value.
The second observation is that in seven cases, Indians were charged
lower fees for tribal land. In four cases, no fee was charged for the
use of tribal land. The effect of having a lower grazing fee or no fee
for tribal lands is to diminish the tribal income and the service the
tribal government can provide its people. Those Indian operators who
use tribal lands are in effect being subsidized by the rest of the tribe.
Table II gives ranching families as a percentage of total families on
the reservation; they range from a minority of 5 percent to a majority
of 63.7 percent. The question is: should all livestock operators be
subsidized at the expense of the rest of the population?
In one of the seven cases, the tribal council passed a resolution
charging $2.08 per AUM on tribal and allotted lands for non-Indians.
The same resolution gives a rebate to Indian operators so they pay, in
effect, $1.56 per AUM. This resolution is unpopular with allottees
who prefer not to lease their land to Indian operators. It has caused
some of them to sell their land or take it out of trust.
The tribal grazing fee is the subject of a GAO report,1 on another
of the sample reservations. In 1968, the BIA set the reservation
minimum at $2.75 per AUM while the tribal council recommended
$0.54 per AUM for tribal lands and $1.72 per AUM for allotted lands
for Indian operators. The council said that Indian land was not fully
competitive due to its limited water, inadequate fencing, lack of con-
solidated land and limited guarantee of continuing grazing privileges.
1 Comptroller General of the U.S., Land Management Activities on Three Indian Reservations in South
Dakota Can Bs Improved, General Accounting Office, June 4, 1975.















TABLE IV. GRAZING RATES PER ANIMAL UNIT MONTH


Tribal land I Allotted land I Set by advertisement I AUM rate2
on private
Set by tribe Set by BIA Minimum set Tribal land Allotted land land (non-
Indian non-Indian by BIA all reservation)
Reservation code No. operator operator operators Minimum Medium High Minimum Medium High

3 ----------------------------------- $1.21 $2.33 $2.33 $1.21 $1.21 $4.98 $1.92 $1.92 $5.21 $5.99
S ------------------------------------ 1.25 3.50 3.50 3.25 4.06 4.37 3.50 4.06 4.37 5.99
6 --------------------------------------- 2.50 2.50 2.50 2.50 2.50 -------------- 2.50 2.50 -------------- 5.43
9 ---------------------------------------.80 1.60 1.60 1.60 2.50 3.14 1.60 2.50 3.14 5.99
26 -------------------------------------- 2.80 2.80 2.80 2.80 3.04 6.55 2.80 3.04 6.44 5.99
29 -------------------------------------- 2.08 2.08 2.08 2.08 2.11 4.71 2.08 2.11 4.71 5.99
13-------------------------------- -.29 2.00 -------------------------------------------------------------------------------- 4.41
8 ----------------------------------------------------- 2.00 --------------- 3.17 ------------------------------------------------------------- 4.41
27 ------------------------------------ .33 1.25-.............. --25 ----------------------------------------------------------- 4.41
7 ---------- ()--------------------------------- () ------------------------------------------------------------------------------------------------------- 5.41
10 ---------()------------------------------ ) ---------------------------------------------------------------------------------------------------------------- 5.41
4. ..---------------------------------- (6) 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 5.36
28---------------------------------() 1.40 1.40 1.40 1.40 1.40 1.40 1.40 1.40 5.36
31 -------------------------------------- 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 --------------
32----------------------------------------------1.50 1.50 ---------------------------------------------------------------------5.29


I Range Management Report for Reservations, 1974.
2 Farm Real Estate Market Developments, Economic Research Service, USDA, July 1975, p. 34.
3 Indian association.


4 Tribal herd,
5 Free.






45


They also said that the 132 small operators (52 percent of all opera-
tors) who had less than 150 cows would be forced out of business by a
fee of $2.75 per AUM. Unfortunately, GAO did not verify any of
these reasons. It only calculated that the tribe lost $4 million in
charging the lower fee over a five-year period. In checking over the
data, it appears that the reservation was always grazed up to and in
excess of its carrying capacity. Indian land was in demand. This indi-
cates that it was competitive with the surrounding land.- GAO found,
in fact, that it was in better physical condition than the surrounding
land. The second reason is probably the most vaid reason for the sub-
sidy: small Indian operators could not compete.
On the reservation which offered the rebate to Indian operators, we
were able to determine what would have been the impact on small
operators first if they hadn't been given the rebate, and second, if they
had been asked to meet the high bid on their reservation which was
roughly equivalent to the local market value.
The average gross income for operators with less than 100 cows was
$6,705. They paid on the average of $1,026 to graze their animals. If
they paid the reservation minimum, it would have cost $1,350; if they
paid the high bid, it would have cost $3.052.
TABLE VI.-NET INCOME AFTER 3 DIFFERENT GRAZING FEE RATES
BIA reserva-
Rebate tion minimum High bid
Average gross income -------------------------------------------- $6 705 $6,705 $6, 705
Grazing fee ---------------------------------------------- 026 1, 350 3, 052
Net income-5,879 5, 355 3,653

It is clear that an operator with an average family of five did not
earn an adequate income even under the rebate system. If the tribal
governments on the two reservations in question want to keep small
operators in business, they are correct in offering them rebates or
lowering grazing fees.
However, does the entire tribe have to subsidize the large Indian
operator or non-Indian operators? Why not give the subsidy only to
operators with less than 150 cows? There is not enough data to de-
termine if large Indian operators could pay the reservation minimum.
Before large Indian operators are excluded from the subsidy, the
impact on their income should be evaluated.
There is no reason why non-Indian operators should benefit from
the differing grazing fees. It seems that low tribal rates have de-
pressed the BIA reservation minimum rate since they bear little relation
to the animal unit month rate on comparable land. On the reservation
with the rebate system, there were 148 non-Indian operators, many of
whom were paying $2.08 AUM instead of $4.71 AUM, the high bid,
which is almost equal to the local off-reservation fee for AUMs. If
all 148 were paying $4.71 AUM, this would have resulted in a gain
of $640,005 in 1974.
On the reservation studied by GAO, there were only ten non-
Indian operators and so the loss from a depressed BIA minimum rate
was not as large.






46


Subleasing
Where there are no controls over who is actually using the range,
a number of different rates encourages illegal subleasing. On at least
three reservations in our survey, it was common for Indian operators
to pay the subsidized rate and then to sublease to non-Indians for
the BIA minimum reservation rate and pocket the difference at the
expense of the tribe.
If the tribe decides it is necessary to keep small Indian operators
in business it would be much more advisable to guarantee them a
certain minimum income from their livestock activities. Everyone,
small Indian operators, large Indian operators, and non-Indians,
would pay the same grazing fee. This would discourage subleasing.
At the end of the year, the tribe could give a direct subsidy to small
marginal Indian operators out of their increased tribal grazing reve-
nues. The direct subsidy payment would bring the net income of the
livestock operator up to an acceptable level.
On large, non-allotted reservations, Indian operators were also sub-
sidized. They usually used tribal land for free. There were usually
no non-Indian operators. On one such reservation, we collected com-
plete information on the number of operators, their herd size, and
current sales prices. The largest Indian operator owned 238 cows
which grossed him $17,377. If he had been required to pay fair market
value in the state for use of the range, his gross income would have
been reduced by $15,450. Similarly, a small operator with 50 head
grossed $3,650. If he had paid the fair market value, his gross income
would have been reduced by $3,246.
Conclusionr for Indian livestock activities
The chief handicap for Indian livestock operators is the small size of
their operations. More animals could be grazed on Indian range by
consolidating tracts, eliminating non-Indian operators and by running
the animals in large cooperative herds over the entire range. We were
not able to determine if this re-organization would guarantee every
Indian operator an economically viable herd. Indian livestock activ-
ities present a challenge to tribal governments in terms of assuring
the best allocation of resources to serve the greatest number of tribal
members. To date tribal governments have done little to improve the
inequitable resource distribution among tribal members for fear of
political retribution. Indian livestock income could be increased
through land consolidation, and increased capital and technical
assistance. However, before such changes can benefit all tribal mem-
bers, tribal governments must solve the inequities among tribal
members.
C.4. MINERAL LEASING
As described in the paper, "American Indian Mineral Agreements,"
in the appendix, Indians are now burdened with inequitable agree-
ments resulting from their weak bargaining positions. Revision of
current leases and the provisions in new leases will be disadvantageous
to Indians unless the situation is changed. This part of the report will
summarize the results of the paper and relate those results to the
experiences of the sample reservations with minerals.
Five of the reservations has mineral production in significant
quantities. The minerals are coal, oil, gas, phosphate, uranium, and






47


iron. One reservation had just signed a uranium lease. Others may have
some copper. It was not possible to determine how thoroughly ex-
ploration for minerals had progressed among all the sample reserva-
tions. Further, it was not expected that tribes would readily reveal
knowledge of possible discoveries.
Before reviewig the problems with current agreements, a brief
review of the relative importance of Indian minerals in the United
States should be instructive. The data comes from the Geological
Survey. For coal, in 1974 production on Indian lands was 1.9 percent
of all U.S. production and 35.8 percent of all federal and Indian
production. For phosphate, production on Indian lands was 4.9
percent of all U.S. production and 35.4 percent of production on
federal and Indian lands. It is not possible to compare Indian produc-
tion to total U.S. production for other minerals. Comparing the
value of all mining on federal and Indian lands in 1974, we find that
the value of mining on Indian lands was 15.6 percent of the total.
For oil and gas, the value of Indian production was 4.4 percent
of the total; if returns from off-shore leases are excluded, the value
of production on Indian lands is 13.6 percent of the value of all
production on federal and Indian land in the continental United
States. In 1974, all uranium produced on federal and Indian land was
produced on Indian land. In all three of these comparisons, it was
not possible to compare the amount produced on federal and Indian
land to the total U.S. production because the Geological Survey did
not report total U.S. production.'
The four major problems with current agreements are that (1)
royalty or rental rates are too low; (2) the duration of the leases is
too long; (3) environmental controls are too weak; and (4) labor and
population controls are too weak. Each of these problems will be
discussed.
(1) Royalty or rental rates are too low.-One cause is that for some
minerals the royalty is fixed in dollars per unit of the mineral, rather
than being a percentage of value. In our sample, phosphate and iron
ore are leased at fixed rates. Uranium, coal, oil, and gas are leased at
percentage rates. Unfortunately, the Bureau of Indian Affairs and
the U.S. Geological Survey fail adequately to audit companies'
statements about the volume of production. A tribe cannot be reason-
ably certain that the true value of the minerals is as the company
reports it.2
Indians do not tax and receive royalties. Usually they just receive
royalties. The difference between the two is important from a com-
pany's point of view.
Depending upon how federal tax laws treat tribal taxation, it might
be possible for a company to deduct a tax from its federal tax rather
than from its before-tax income.
I Department of the Interior, Geological Survey, Conservation Division, Federal and Indian Lands:
Coal, Phosphate, Potash, Sodium, and other Mineral Production, Royalty Income, and Related Statistics,
March 1976, pp. 31, 37, 50, 66, 77, 80, 290, 291.
2In Jicarilla Apach Tribe v. Southern Union Gas Company, et al., U.S. D.C. for the District of New
Mexico, i976, the tribe has by discovery obtained data showing that the US GS does not critically examine
sales between a parent and its subsidiary. Nor are by-products adequately accounted for in royalty collec-
tion. An internal audit by the Department of Interior revealed delays in the processing of royalty payments.
The "Report to the Federal Trade Commission on Mineral Leasing cn Indian Lands," Bureau of Com-
petition, FTC, (October 1975) discusses other apparent underpayments, particularly for oil and gas, on
pp. 183-193.






48


Consider a $500,000 annual royalty charge. A company deducts
it and pays taxes on the remaining profits, for example at a 40% rate.
Converting the royalty to a tax means that before tax, income would
rise by the $500,000; the company would pay 40% of this, or $200,000,
in increased taxes. But the company can now deduct the tribal tax
of $500,000 from its now higher federal tax. The result is that the
company's total after tax income rises by $300,000. The company
would prefer paying a tax rather than a royalty, and a tribe could
bargain for a higher cash return from taxation than from rental. The
federal government, of course, would then bear part of the tribal tax,
as it has chosen to do for taxes of other countries.
The taxes earned by a state government on minerals produced
from a lease by one of our tribes at present amounts to three times
as much as the royalties received by the Indians.
(2) The duration of leases is too long.-Nearly all can be indefinitely
extended if production is occurring. The provisions for redeterining
the rental rate are usually weak. The extension provision results
from the Omnibus Mineral Leasing Act of May 11, 1938 (25 U.S.C.
396 a-f), which states that minerals may be leased ". . for a term
not to exceed ten years and as long thereafter as minerals are produced
in paying quantities." The limit of ten years is contradicted by the
possible indefinite extension of time. Long-lived leases accentuate
the low price problem. In a time of general inflation, a fixed per ton
payment can become a very small share of the total income from a
particular mineral production activity. For percentage royalties,
should the usual landowner's share drift upward over time, a tribe
with a long lease would lose relative to those.with short term leases.
Long term leasing problems can be avoided if terms could be
renegotiated periodically. Some leases contain provisions enabling
the Secretary of Interior to redetermine royalty rates and other
provisions of a lease every ten years. But such leases rarely contain
a method by which a tribe can force such Secretarial action by not
defining the reasons which require redetermination of lease terms.
The relevant provision of a lease on one of our sample reservations
stated the following, which gives no standards to define "reasonable
adjustment:"
Adjustment of terms or conditions
The terms and conditions of this lease shall be subject to reasonable
adjustment, with the approval of the Secretary of the Interior or his
authorized representative at the end of each 10-year period. Should
either party to this lease desire to effect a reasonable adjustment in
any of the terms or conditions of this lease, then the party desiring
such reasonable adjustment must give written notice of not less than
120 days to the other party prior to the expiration of each 10-year
period of the term of this lease. Such written notice shall specify in
particular the section of the lease which is desired to be adjusted. If
such notice to make reasonable adjustment is not given as herein
required, then the terms and conditions of this lease shall continue
in full force and effect during the next successive 10-year period. In
the event the parties have not reached an agreement by six (6)
months after the commencement of each successive 10-year period
of the terms of this lease, then the matter shall be submitted to the
Secretary of the Interior who will make a determination, giving due






49


consideration to the facts as presented by both parties, and his deter-
mination shall be final.
Related to the problem of long term leasing is the fact that Indians
have no way to control the pace of development. The only language
which controls such development is that there be "paying quantities"
of mineral production. Some leases contain clauses prohibiting holding
a lease for "speculative purposes." Without tighter control over the
timing of development, two disadvantageous possibilities may occur.
A tribe may wish immediate development, while a firm may wait.
Conversely, a tribe may wish to delay development, while a firm
proceeds unimpeded.
(3) Environmental controls are too weak.-Indians are unable to pre-
vent environmental degradation resulting from development except
through the very cumbersome mechanism of the National Environmental
Protection Act. NEPA's main contribution is to cause delay. A tribe
may wish to control the form of development rather than to delay it;
yet without the opportunity to bargain effectively, the tribe cannot
impose the controls it wants or extract a higher royalty in return for
not imposing the controls. It may be too early to know how much
strength tribes can put in codes controlling development, particularly
on leases which already have been signed.
(4) Labor and population controls are too weak.-Mineral develop-
ment invariably increases the population of non-Indians on or near a
reservation, creating political difficulties for the tribal government
and cultural problems for the Indians. Tribes wish to be able to reach
a reasonable accommodation with the non-Indians who move in,
but are unable to do so if they cannot set some controls which are
widely known from the very arrival of the new residents. An alter-
native in some cases is for Indians to provide the labor for developing
the minerals. Although training may entail some costs, the tribe
could exchange rental receipts for training opportunities if it could
bargain effectively. Current clauses requiring employment of Indians
are vaguely worded and raise questions of enforceability. This situation
has been reported for several reservations, and it can be documented
on at least one of the sample reservations.3
All of these four problems are examples of Indians receiving too
small a share of the returns from mineral development. If they could
choose, some tribes might wish to impose environmental controls and
workplace controls which lower the monetary return, while other
tribes may prefer to maximize the monetary return. Unfortunately,
tribes now receive low monetary return without any of the other
controls either.
The difficulties in mineral leases are caused by the weak bargaining
position of tribes in relation to potential resource developers. This
weak position is created by five conditions. Our appendix on mineral
agreements explains the following five points at greater length and
suggests ways to strengthen the tribal position.
1. Tribes make decisions in a virtual vacuum of information, par-
ticularly about the financial and production aspects of mineral agree-
ments. The BIA makes decisions in a similar vacuum, thus failing to
discharge the federal government's trust responsibility. Since the
3 For the general situation, see "Report to the Federal Trade Commission on Mineral Leasing on Indian
land," pp. 194-196.






50


Bureau has failed to develop information to guide its decisions, a
demand that the Bureau provide information to the tribes will leave
tribes knowing little about the true value and dangers of mineral
development.
2. Exercise of Secretarial approval powers creates uncertainty about
tribal powers to draw up, negotiate, and enforce contracts on its own
initiative. Even if a contract is approved as desired by a tribe-
presuming the contract is good because the other problems listed here
have been circumvented-the approval process itself has an unpredict-
able duration. No one can plan during the approval process. Since
the Bureau's information is inadequate, judgments about contracts
must be viewed skeptically.
3. Tribes are third in line behind the federal government and states
in power to tax and to regulate development, although they do not
have to be if their sovereign powers can be enforced. The current
legal situation causes considerable uncertainty, and tribes are bearing
the expense of litigation to defend their powers while states collect
taxes. In July, 1975, the State of Montana began to collect a tax on
coal. In January 1975, the Crow, one of the tribes surveyed, enacted
a severance tax of their own. As of July, 1976, the Secretary of the
Interior still had not acted on the tax code. After he acts, a court
fight will ensue.
4. Failure by the Department of the Interior to audit royalty
payments adequately illustrates the fact that tribes find it difficult
to force companies to comply with even current weak contracts. Federal
regulations make it difficult for tribes to enforce contracts. Currently
proposed changes in the regulations will not improve tribal powers.
5. Finally, tribal difficulties in obtaining capital and credit forces
them to accept inequitable lease agreements. The need for cash
creates pressure on a tribe to settle early during a bargaining process.
Perhaps tribes accept proposals presented by the BIA because prices
seem so attractive. Alternative sources of income and credit would
decrease the importance of immediate cash and allow tribes to
bargain more effectively.
C.5. FOREST MANAGEMENT
In a different form, Indian control over forest resources suffers
from some of the five problems which affect Indian control of mineral
developments. Non-Indian control of forest inventories and other
data gathering weakens Indian control. The approval powers of the
Secretary interfere with adoption of contracts and the proper inter-
pretation of policy in forest management. The state taxation problem
does not appear to be significant. Tribes cannot be reasonably certain
that the Bureau is enforcing timber contracts, and is practically
unable to force contracting officers to make sure that the provisions
are reasonably carried out. Finally, federal control of timber produc-
tion is one of the major capital market difficulties for Indian tribes
with substantial timber holdings. Timber is capital and from the
economic point of view should be treated as such.
This survey of forest management first considers the importance
of timber on the sample reservations and compares that data to
previously published averages for all Indian reservations. Next,
a review of some of the principles of good forest management follows.






51


This review provides a basis for assessing current BIA management
procedures in terms of the five issues raised above. Finally, the relation
of BIA procedures to those recommended by the General Accounting
Office will be considered.
Timber use on the sample reservations
Table 1 gives the division between Indian and non-Indian cutting
on the sample reservations, according to BIA data for calendar year
1974. Significant timber harvests occurred only on large reservations,
and sales constituted a major source of income for seven reservations.
One can compare the percentages either by using relative volumes or
relative sales. First, based on volume, Indians cut 51 percent of the
timber, while non-Indians cut 49 percent. The ratios differ when the
large reservations are divided into allotted and non-allotted groups.
Second, based on sales, Indians cut 36 percent of the timber value and
non-Indians cut 64 percent of the value. The ratios again differ when
the division between allotted and non-allotted reservations is made.
TABLE 1.-COMPARISON OF INDIAN AND NON-INDIAN HARVESTS OF TIMBER FROM SAMPLE RESERVATIONS, 1974
Volume (thousands of board feet) Sales
Non- Non-
Indians Indians Total Indians Indians Total
Large------------------------- 94, 992 37, 299 132, 291 $6,574,000 $3,411,000 $9,985,000
Allotted (percent)-.72 .28 1.00 .66 .34 1.00
Lare-------------------------.121,960 172,995 294, 955 5,794, 000 18, 770, 000 24, 564, 000
Nonallotted (percent) -----------------.41 .59 1.00 .24 .76 1. 00
Total ----------------------- 216, 952 210, 924 427, 246 12, 368,000 22, 181, 000 34, 549, 000
Percent-------------------.51 .49 1.00 .36 .64 1.00

Earlier figures based upon national averages reveal that in 1968
approximately 80 percent of the volume of timber was cut or milled
by non-Indians.' The major reason for the discrepancy is that the
sample contains two reservations on which Indians have constructed
their own lumber mills. The cut on these reservations is large and
heavily influences the percentages in Table 1. Also, the BIA data
discusses only timber cut, without reference to the identity of the
owner of the mill to which the lumber is taken after cutting. The 80 %
figure just cited refers to milling as well as cutting. Another possible
reason for the discrepancy is that there may have been a shift into
processing by Indians between 1968 and 1974. Presently, there is
insufficient data to verify the truth of this possibility.
Summary of forest management principles
Forest management raises complicated questions. This review
relies heavily upon a recent conference at the University of Wash-
ington, and particularly upon papers by Paul Samuelson and Leon
Moses2
Samuelson suggests that the owner of land which is used exclusively
for timber (and which has no side-effects on other land) should choose
1 Rich Nafziger, "A Violation of Trust? Federal Management of Indian Forest Lands," Americans for
Indian Opportunity, June 1976, p. 1, quoting "A Study of the Indian Forestry Program," Cornell, How-
land, Hayes and Merrifield, Cornwallis, Oregon, Appendix 2, p. 23.
2 Paul A. Samuelson, "Economics of Forestry in an Evolving Society," and Leon Moses, "Economics of
Timber Harvest Regulation," papers presented at symposium, "The Economics of Sustained Yield
Forestry," College of Forest Resources, University of Washington, Seattle, November 23, 1974. A set of
the papers will be published by the College of Forest Resources.







the age at which he cuts his trees primarily by examining the real
rate of interest available to him in capital markets. Such an owner
chooses tree age which is less than that chosen for the purpose of
maximizing the size of the annual cut; although a steady flow of timber
arises from cutting timber in this manner, the alternative of investing
timber receipts in the capital market makes it uneconomic to let
trees grow large enough to maximize the physical amount of annual
harvests.
This view of economists is fairly well known, and supports the idea
that old virgin forests should be cut and replaced by younger growing
trees.
But the analysis of the simple forest situation presented in Samuel-
son's paper is only the start of the analysis for a large forest in which
many possible ways to cut the virgin forest exist. One cannot ignore
transportation costs, planting costs, or environmental externalities.
Further, one must have a reasonably accurate idea about the deter-
minants of tree growth in order to decide in what manner to transform
the virgin forest into a cutover forest growing new trees.
As a virgin forest is cut and a "managed" forest created, landowners
must identify the land which is most productive for timber production
and land which is better suited for other uses. The costs of transporta-
tion to mills will affect that decision, as will the importance of com-
peting land uses for recreation and water supply.
On land used in forest production, the most important decision for
future use is the manner of the cut and the form of regeneration which
occurs. Also significant is the choice of which lands to cut when. Few
landowners, and certainly not Indian tribes, wish to cut all their old
growth timber on commercial timberland at once. Such action dra-
matically produces an uneven flow of future timber. New trees on
cutover land would all mature at the same time in the future. Some-
what lower priority might be placed on timber thinning decisions,
for once the replacement forest is started, many years elapse before
thinning is required. During those years, market conditions change
and knowledge about the growth characteristics of trees increases.
Both of these factors should change timber thinning decisions.
Although the transformation of a virgin forest into a managed
forest is supposed to give a forest of balanced age types, few forest
managers succeed in creating such a situation. Budget priorities, fires,
insects, and accidents of other sorts mean that a forest is never a simple
collection of equal numbers of trees of every age within each species
and each degree of accessibility.
To manage a complicated forest well, one needs a computer model.
Such models are now available and will become more sophisticated
and productive in the years ahead. A clear and simple proof of the
usefulness of such models is provided by Ernest M. Gould and William
G. O'Regan.3
The Forest Service has developed a package called Timber RAM;
although economists-Leon Moses, for instance-find defects from
their point of view in Timber RAM, it is a flexible tool which could be
used to plan where and when to cut in a complicated forest.
The preceding remarks about the proper age to harvest trees, the
problem of timing the cuts, and the usefulness of computer models all
I Ernest M. Gould, Jr., and William B. O'Regan, "Simulation: A Step Toward Better Forest Planning,
Harvard Forest Papers, No. 13, 1965.





53


refer to long-term planning of forest development. Such plans would
give the proper amount of timber to cut in a particular decade, but
would not give annual amounts. The proper time to cut timber within
a decade depends upon the housing cycle and other determinants of
the price of lumber. To plan and cut equal amounts of timber each
and every year would give less revenue than uneven harvests within a
decade. One should harvest the timber when its price is highest and
also obtain that price through advantageous timber harvest contracts.
Present Bureau policy favors equal annual harvests irrespective of
market price. Harvesting during a period of low prices is somewhat
mitigated because most timber contracts allow some under and
over-cutting during a particular year, provided that the total amount
harvested does not vary from the estimated amount.
Evaluation of BIA management practices
Based upon the literature briefly summarized in the preceding sec-
tion, one can assess the quality of management of Indian timber lands.
The categories for this evaluation are:
(1) Information.
(2) Approval Power.
(3) Taxation.
(4) Contract Enforcement.
(5) Capital.
(1) Information
Evaluating Indian forest management requires examination of the
BIA's concept of "annual allowable cut." The Bureau applies two old
and simple formulas to determine what cut is "allowable" on uneven
age and even aged stands of timber. Having determined the allowable
cut, the choice of actual acres to cut is made in the field according to
the judgment of the foresters in charge. Serious objections can be
raised about the use of these two formulas.
Failure adequately to model the forests for the purpose of determin-
ing the cutting schedule is another problem separate from the calcula-
tion of the allowable cut.
After discussing the formulas for the allowable cut, the formula
to adjust stumpage values in response to changes in the market price
of lumber will be discussed. As with the formulas used to compute
allowable cuts, the stumpage adjustment formula is seriously out of
date. It fails to adjust for changes in the efficiency of mills which
make lumber scale and log scale measurement different. The difference
is recognized by the BIA only in the appraisal process, not in the
stumpage adjustment process. The result is that tribes earn much less
than they might when markets are good. If the BIA allows timber
contractors to revise stumpage prices downward during bad markets,
Tribes fail to benefit from the stumpage formula when prices are
low. Since prices have been rising in recent years, the benefits derived
from the formula in slumps have not been available, while tribes
have lost during good years. The reason is that the formula used to
adjust stumpage prices causes those prices to rise moderately when
lumber prices rise, and to fall moderately when lumber prices fall.
The formula also causes profits to rise faster then stumpage prices
when lumber prices fall.
Allowable cut calculations use the Austrian and Hanzlik formulas.
These formulas are described below. They make no use of economic






54


concepts such as the rate of interest, transportation costs, the price
of timber relative to other goods, or the value of land in alternative
uses.
Adjustment for those factors must be done outside of the appli-
cation of the formulas, by decisions such as those determining which
forest land is "commercial." Indians have no assurance such decisions
are well made. "Allowable" does not mean "optimal."
Some may not accept the above economic objections to these two
formulas. There are other types of objections. Both of these formulas
use a predicted future growth rate of the forest. The BIA's predicted
rates for cutover land are invariably higher than current rates of
growth on cutover land. Use of the high rates assumes that the
Bureau will achieve those rates through improved management.
Yet by its own admission, the Bureau is not completing the man-
agement tasks it has set for itself. In the Program Strategy Paper
for Fiscal Year 1978, the Bureau of Indian Affairs directed the
following comments to superiors in the Department of Interior:
Forestry.-The Bureau is proposing a double-bitted program of
forest development and timber harvest. The total program includes:
1) increasing annual timber harvest from the current 850 million
board feet to the allowable 1,050 million board feet; 2) to carry our
reforestation and timber stand improvement work on 39,500 acres
of new work each year; and 3) eliminating, over a ten-year period
the 912,000 acres of accumulated reforestation and timber stand
improvement work. Full realization of the program is possibly only
at the unconstrained funding level (Priority D). At the Priority A
and B levels, we are proposing a $5 million increase to initiate the
ten-year program to elimiuate the accumulation of reforestation and
TSI work.
The 912,000 acres of accumulated backlog consists of 7.2 percent
of the 12,619,000 acres of total forest land and 17 percent of the
commercial forest land on Indian reservations in 1974."
Bureau representatives received some questioning on the subject of
the reforestation and timber stand improvement at the 1977 House
Appropriation hearings. They reported that in fiscal year 1975, a total
of 26,408 acres of timber stand improvement and reforestation had
been completed. The total backlog consisted of 173,365 acres needing
reforestation and 738,593 acres needing timber stand improvement.
The Bureau estimated that a total of 39,500 acres are added to the
backlog each year, 9,500 in the reforestation category and 30,000 in
timber stand improvement category. The difference between 39,000
and 26,000 represents an increase of 7,000 acres to the backlog each
year.4a
In spite of the fact that the Bureau has not been completing past
work in regenerating and improving the forest, the budget narrative
proposed to achieve the allowable cut levels calculated by the two for-
mulas. The allowable cut calculations assume that the regeneration
is occurring, and that in the future Indian forests will grow faster. Yet
there is a backlog requiring ten years to eliminate.
4 The GAO reported that the Bureau's estimates of land needing thinning and reforestation may be too
low because the Bureau does not add new acres to backlog estimates as harvests proceed. "Indian Natura
Resources--Opportunities for Improvd management and Increased Productivity, Part I, Forestland,
Rangeland, and Cropland," August 18, 1975, p. 16.
"t U.S. Congress 1House, "Department of the Interior and Related Agencies Appropriations for 1977,"
IHearings before a subcommittee, Committee on Appropriations, Part 6, March 3, 1976, p. 150 (94th Cong.,
211d sess.)






55


To prove this statement requires careful examination of the two
formulas. Although technical, such an examination is very important
to reveal the dangerous simplicity of the concepts the Bureau uses.
The Austrian formula is the following:
AC-= I + (Vo-Vn)/n
where the symbols mean the following:
AC=Annual allowable cut per acre
I=Average annual increment during period of developing
desirable levels of growing stock (this entity is further
defined below).
Vo=Volume in year "0", namely, the year in which the allow-
able cut is computed.
Vn-Desired volume at the end of "n" years.
n-The number of years accepted as a desirable period in which
to develop the "Target" level of growing stock.
Before discussing these components of the formula, we must define
"I", the average Annual increment during the adjustment period.
I=Y2 Current gross growth-mortality= anticipated opti-
mum growth.
In other words, I, the average annual increment is the "simple"
average of the current net increment and the increment that will
-occur at the end of the planning period for adjusting to the desired
level of growing stock.4b
We must question each of the terms in the above equation, beginning
with the concept of "anticipated optimum growth." The following is
a quotation from a timber management plan on one of the reservations:
The allowable cut calculations are based in part on the assumption that the
forest will be brought to an intensively managed status during an eighty year
.adjustment period.
As the earlier quotation from the BIA budget document says, the
assumption is false. The BIA estimates it will take ten years just to
get caught up with the national backlog of regenerations and timber
stand improvement.5
Further, when the BIA uses the "anticipated optimum growth" in
the Austrian formula, it does not report to tribes any estimate of the
accuracy of their figure. Usually, the growth rates are based upon five
or ten year measurements of a forest. Since the anticipated rates are
to be achieved over a much longer period, a small error in the sampling
procedures or in other assumptions could potentially make the annual
allowable cut calculation contain a very great error.
On the Spokane Reservation, which was 96% cutover at the time
of inventory, the inventory analysis revealed current net growth of
149 board feet per acre in 1970, predicted net growth of 172 board
feet per acre for the next five year period, and predicted 275 board
feet per acre for 2010. The 275 figure was based on an assumption
that unsalvaged mortality (20 board feet per year in 1970) would be
zero in 2010. The study offered no assessment of the statistical prop-
erties of the 275 board feet estimate, beyond stating, "Since the pro-
4b Bureau of Indian Affairs, "Indian Forestry Center, Handbook for Continuous Forest Inventoryi-
3rd edition (Sept. 1974), Part III, p. 41.
5 The statement in the text may be overly generous to the Bureau. Some foresters appear to believe that
;a portion of the forest has been brought under intensive management merely if it has been logged once and
has roads. The removal of a portion of the old growth will automatically cause an increase in the rate of
.growth of the remaining timber, which can be called "intensive management" even though the Bureau is
doing nothing active to promote that growth.
77-462-76----5






56


jection procedures contain a number of conservatisms it is reasonable
to assume that the above indicated averages per acre are substantially
less than will be achieved under future management." The projection
also contained a certain number of optimistic assumptions.6
The problems with the formula also extend to other components.
What determines the "desired volume" at the end of the adjustment
period? There is considerable uncertainty about the relationship
between forest growth rate and the average volume of timber per acre
in the forest. The Weyerhauser Company, for instance, plans a dense
stocking and high volume per acre simply because with present levels
of knowledge the optimum is not known. Weyerhauser feels that
overstocking can be removed more cheaply than new trees can be
grown. Such removal will be required if it turns out that high volume
does restrict growth. Weyerhauser may be right or it may be wrong.
Experience with its forest will tell the answer. The Bureau, however,
has preferred low volume to a high volume of residual growing stock.
Whether the Bureau is right or wrong in this assumption is simply not
known.
The number of years used to adjust the forest, "n" is determined by
looking at the desired rotation age for the species dominant on the
land, and then comparing that to the number of years for which
harvesting has occurred on the reservation. The desired rotation age
is that age chosen to maximize physical yield. Examination of the
formulas show, however, that more than the rotation age is involved
in computing the annual allowable cut.
Further examination of the concept of "adjustment period" shows
that the allowable cut is not necessarily the sustainable cut after the
period of adjustment has been completed. The forest is gradually cut
so that new growth will have a variety of ages and sizes. But the
standing volume took many years to grow. After all the old growth
has been cut once, the new annual allowable cut will be the average
annual increment per acre of the managed forest times the total
number of acres. The second term of the formula given above will be
zero, for Vn and Vo will be equal. It is possible for the annual allow-
able cut to fall or to rise at the end of the "n" years. How many tribes
realize that the formula works in that manner? GAO missed this
point in a recent study.7 The language clearly says "allowable," not
"sustainable," and that is what it means.
The forestry profession's use of the words "sustained yield manage-
ment" is a misnomer. The principle is to bring the forest under man-
agement, in order to obtain an even flow. The cut during the period of
bringing a forest under management may not be a sustainable cut.
The subsequent cut will be sustainable.
Finally, the formula is computed as an average per acre for the
forest lands defined as "commercial." A Bureau handbook defines
commercial acreage as follows:
Commercial Forest Lands.-This is defined as forest lands producing
or capable of producing crops of industrial wood and not withdrawn
6 Bureau of Indisn Affairs, "Spokane Indian Reservation, A Forest Tnventory Analysis," June 1972,
pp. 1. 7-8, 41-46. The projection denended heavily uTon measured ingrowth during 1964-1960. No estimate
of the quality of that figure was given in the report; therefore, no assessment of th quality of projections
baed on the figure is possible, irrespective of the optimism or conservatism of other ssumntions.
7 U.S. General Accounting Office, "Indin Natural Resources: Opportunities for Improved Management
and Increased Productivity," August 18, 1975, p. 10.








from timber utilization. Areas qualifying as commerci -I forest land
must have the capability of producing 20 cubic feet or more per acre
per year of industrial wood under management. Currc(itly inac-
cessible and inoperable acres are included, except when the areas
involved are small and unlikely to become suitable for production of
industrial wood in the foreseeable future.8
No provision is made here for the cost of making presently inacces-
sible land accessible. Further, no attempt is mentioned to predict
which lands in the future might be withdrawn from timber production
because competing uses are more important.
Should a timber manager choose to manipulate the Austrian formula
in order to obtain a rate of cut which is actually determined by other
considerations, how might he do so? The three items which are deter-
mined by appeal to professional competence are the anticipated
optimum growth per acre, the desired volume per acre at the end of
the adjustment period, and the number of acres that are commercial.
High allowable cuts can be computed by having a high anticipated
growth per acres, a low anticipated volume per acre of growing stock,
and a high number of acres of commercial timber land. Low cuts can
be computed by going in the other direction on each three items.
Without a thorough examination of the actual use of the Austrian
formula by the Bureau, and without separate computation of what the
cut would be under an alternative management scheme, one cannot
determine whether the current cut from Indian forest lands is too
high or too low.
In a recent commentary, the Go government Accounting Office criti-
cized the Bureau for not harvesting the full allowable cut both
nationwide and on the three reservations which they chose to study.9
If it is true that the Bureau is not managing forest intensively -as
the GAO study states-then the proper thing to do based on the
Austrian formula is to lower the annual allowable cut to correct for
the lower predicted growth of the forest. The GAO failed to under-
stand this point, and supported the Bureau's argument that they
need more forestry personnel for harvest supervision.
The Austrian formula just discussed applies to uneven-aged timber
lands, such as pine and Douglas Fir. For spruce and other species, for
which clearcutting is the usual harvest practice, the Bureau applies
the Hanzlik formula, which dates from 1922.
The Formula:
AC- (Vm/R) + 1.
Where
AC=Annual allowable cut.
Vm=Volume of mature merchantable timber above rotation
age.
R= Rotation period adopted.
I= Average increment that is predicted will occur between time
of computation and the time that regulation has been
achieved.
The formula contains two concepts which are in the Austrian
formula: the average annual increment (with its assumption about
I Bureau of Indian Affairs, Handbook for Continuous Forest Inventory, 3rd ed., 1974, "Definitions," p. 4.
9 U.S. General Accounting Office, "Indian Natural Resources-Opportunities for Improved Management
and Increased Productivity, Part I, Forest land, Rangeland, and Cropland," August 18, 1975, pp. 1, 10, 27.






58


future growth) and the cutting of old growth timber. Thus, once
regulation is achieved, the first term, Vm/R, will be zero and the rate
of cut will be determined only by the average rate of growth of the
forest. There are some difficulties actually applying this formula to
achieve an even flow.
Some other computations are required. One Bureau manual suggests,
however, that such checks are not necessary:
Historically, each such complex adjustment has proved unwarranted when cast
in the later light of 1) changing utilization standard, and 2) changing views of
the increased productivity that will be achieved during the remainder of the
first rotation. Accordingly, if adequate inventory data are available for use of the
Hanzlik formula to compute allowable cuts, the detailed area-volume checks
should not be made unless all data in the formula are based on the most intensive
"utilization-growth prediction" standards available10
One reasonably concludes from this statement that Bureau applica-
tion of the Hanzlik formula often includes quite generous allowances
for future growth and realization of harvests. The criticism that the
BIA is not actually intensively managing Indian forests thus applies
to BIA use of this formula.
The Hanzlik formula does not use the concept of an optimum
volume per acre but bases the computation of the quantity of old
growth volume directly upon the accepted rotation age for that type
of timber. Many economists may feel that the rotation age is too
high, thus lowering the allowable cut and lengthening the period
which it takes to bring the entire forest "under regulation"-i.e., to
harvest all commercial acres at least once.
Since the BIA uses these two formulas for its management decisions,
it collects only that information which is required to apply those
formulas. Forest inventories do not classify the standing timber
according to accessibility or other factors which are important eco-
nomically. Rather, averages are given for all lands which are deter-
mined to be commercial forest land. Thus, a tribe wishing to take over
management of its own forest and to use other procedures would
have to spend a period collecting additional data to make existing
inventories useful for other methods of managing the forest.
This completes the discussion of one of the two types of formulas
which are important in the management of Indian timber. Another
very important formula governs the price of timber on the stump
when sold in timber sales which last many years.
Most timber sales contracts contain adjustment clauses for stump-
age, the price paid per thousand board feet measured log scale as the
timber is cut. At the time the winning bid is made and accepted,
there is a level for the lumber price index of each species sold. In the
West, the Western Wood Products Lumber Price Index is often used
for the lumber index. This index is provided for lumber measured in
lumber scale. During the timber sale period, changes in lumber prices
should cause stumpage to change. The usual adjustment clause takes
the difference between the index price at the time the timber is cut
and the index price at the time the contract was signed, multiplies
that difference by a factor (.5 or .75 are common), and adds the results
to the base bid price. Thus, stumpage goes up when lumber prices
rise, and falls when lumber prices fall.
U BIA, Handbook for Continuous Forest Inventory, 3rd. ed., 1974, Chapter III, p. 43.








The error in this procedure is that lumber scale and log scale are not
the same any more. Technical progress and changing utilization
standards have enabled mills to obtain more lumber per log than
formerly. Currently, lumber scale is 1.3 to 1.5 times larger than log
scale. An increase of $10 per thousand board feet log scale equals an
increase of $13 to $15 per thousand board feet lumber scale.
If the lumber price index rises by $10, there is an increase in revenue
of $13 per thousand log scale to the mill if we take the small value.
If the stumpage adjustment formula uses a factor of .5, an apparent
50-50 split between purchaser and tribe, then stumpage would go up
by .5 (10), or $5. The firm receives an additional $8, the tribe an addi-
tional $5. The split is not 50-50 because log scale and lumber scale
are different.
When lumber prices are generally moving upward, as they have been
in recent years, this arrangement favors firms with long-term timber
sales contracts."
(2) Approval Powers
At present, all significant timber sale contracts must be approved
by the tribe and by the Secretary of the Interior or his representative
on approved contract forms (25-CFR-141.12). Should a tribe wish to,
make changes in these contracts, it must persuade the BIA to agree.
A tribe can refuse to approve a contract, if it wishes to forego income
until a better one can be written or if it wishes to wait until prices
improve.
On some reservations, including one in our sample, the Bureau has
approved long term sales. One reservation in our sample has a ten
year sale with no adjustment clause for stumpage. Federal regulations
require that the Secretary authorize contracts which have longer
terms than five years (25-CFR-141.17); otherwise, the contracting
officer in area offices can approve the contracts.
From our sample of reservations, it appears that the Secretary has
allowed several tribes to build lumber mills. The Bureau helped one
tribe finance the construction with a loan. There was interference in
the use of the profits of that enterprise when the tribe wanted to lend
money to another tribal enterprise.
(3) Taxation and regulation by States
Our sample reservations reported few difficulties with either of these
issues in regard to timber. Lumber mills are more profitable when
trust land location and Indian ownership makes them able to avoid
state and federal taxes. One mill owned by a non-Indian but located
on leased trust land was paying local property taxes. A tribal lumber
mill was not. Non-Indian mills located outside of reservations which
use Indian timber must, of course, pay property and all other taxes.
(4) Contract enforcement
Although few of the tribes surveyed complained about timber
contract enforcement, the Bureau's backlog of regeneration needs
suggests that too much attention is paid to timber sales and too little
to 'the impact of harvest method upon timber regeneration. The
11 Tribal lumber mills are often good investments simply because of this feature of adjustment clauses
now in use by the Bureau. Any mill purchasing Indian timber benefits; by building a mill, the tribe obtains
this benefit in the profits of the mill. One must ask if there is not a cheaper way to get this particular benefit,
by writing different contracts. Tribal mills, of course, also have a tax advantage.






60


Quinault Reservation has experienced severe difficulties with re-
generation on logged allotted lands. Bureau enforcement of timber
sales were not investigated sufficiently to support firm conclusions
here.
(5) Capital
Trees are capital. For those tribes with substantial forest holdings,
the restraint of sustained yield as interpreted by annual allowable
cuts would conceivably prevent use of the forest as a source of direct
financing for tribal investments. It would appear that tribes have not
used timber in this manner out of their own desires for an even flow
of income.
By ignoring the real rate of interest and other economic considera-
tions such as the relative price of timber, transportation costs, and
the cycle in lumber prices, the BIA's formulas cause tribes to receive
less income than would otherwise be the case. Since roads to timber
sales are paid for by lower stumpage receipts, construction of these
roads must be considered as an investment whose cost must be
balanced against the increase in the present value of future timber
growth on the lands which have been made accessible. The Bureau
makes no such calculations at present.
Analysis of the Austrian and Hanzlik formulas should make clear,
however, that tribes cannot determine if presently calculated annual
allowable cuts are above or below that which a different and more
advanced forest management approach would offer.
Another capital issue is the construction of lumber mills. Two tribes
of the thirty-two visited had large mills and two had small mills.
Tribes are beginning to move into the processing stage in this field,
and other tribes with adequate timber bases should also consider this
the possibility.
Conclusion
This assessment of BIA forestry practices differs from other
assessments, particularly the recent study by the Government Ac-
counting Office. That report recommended that the BIA be enabled
to hire additional staff in order to carry out more intensive timber
management and to increase the actual cut of timber on Indian lands.
The BIA agreed with this recommendation.12
Much more fundamental change is required. Merely adding staff to
administer a management program based upon rudimentary and out-
of-date formulas will not assure tribes of higher returns. Further, to
recommend that the cut be increased before the regeneration and
timberstand improvement has been carried out is inconsistent with
the formulas which now guide the calculations of annual allowable
cuts. According to the BIA, the numbers used in those formulas assume
that the forests are being intensively managed. Both the GAO and the
BIA agree that the forests are not being intensively managed. There-
fore it is not objectionable that allowable cut levels are not being
achieved!
This conclusion suggests a different interpretation of the fact that
the Bureau now allows tribes to retain administrative fees assessed
against timber sales receipts if they spend that money on timber
management. In fiscal year 1973, tribes contributed $3.7 million to
12 GAO, "Indian Natural Resources" (August 18, 1975, pp. 27-29).








forest management under the administrative fee program. The fed-
eral government contributed $5.9 million.13 Since tribes now pay for
38% of their forest management, they should demand that at least a
portion of these funds be spent on improving the quality of data and
management models of their forests.
One suggestion for improving that quality is that timber tribes
insist upon and hire a team of people who know modern forest manage-
ment techniques to suggest changes. These people would come from
private industry and universities. Since one must expect such a study
team to recommend sweeping changes, it would be essential that tribes
rather than the Bureau hire the team. The study could review all
Bureau timber management, the management of particular reserva-
tion forests, or a combination of these. Tribes could then adopt the
proposals as they wished for their forests.
C.6. FISHING
The fisheries problem is both legal and economic. For years states
have not recognized Indian rights reserved by treaty. The states
through their police power have prevented Indians from fishing at
their usual and accustomed places. Consequently, development of
fishing industries was retarded by lack of control over their fishing
resources and the failure of the Federal Government to protect these
invaluable resources.
In U.S. v. Winans, 198 U.S. 371 (1904), the Supreme Court noted
that rights and interests not specifically granted by Indian tribes in
their treaties, were reserved by the tribes. What had not been specifi-
cally granted was reserved. Those tribes in Washington State which
had not specifically granted their fishing rights to the U.S., for exam-
ple, had retained those rights. U.S. v. Washington, 384 F. Supp 312
(WD Wash. 1974). The court recognized that the Indians were entitled
to one-half of all fish caught in the "usual and accustomed" fishing
areas.
Although Washington supra (Boldt's decision) recognized that treaty
tribes had vested rights in fishing, continuing controversy exists with
respect to conservation and quality of claim.
Conservation
In Arnett v. 5 Gill Nets, California Ct. app 1st Dist. Div 3, (5/27/75)
Cert denied, the court stated: Passage of Public Law 83-280, 67 Stat.
588, transferring jurisdiction over Indian reservations from the Fed-
eral Government to the State of California did not result in the state's
acquiring jurisdiction to regulate fishing rights of Indians on the
Klamath Indian reservation. The State has no right under its police
power to restrict Indians' subsistence fishing on their own reservation
by prohibiting gill netting in interest of conservation.
But, in Department of Game v. Payallup Tribe, 548 P. 2nd 1058
(Wash. Supreme Ct. 1976; on remand from U.S. Supreme Ct.) The
court stated:
We conclude therefore that a proper interpretation of the treaty of Medicine
Creek permits the state to promulgate conservation regulations meeting appro-
priate standards that affect all citizens, Indian and non-Indian, equally.
13 GAO, "Indian Natural Resources," p. 8.






62


The police power of the state to regulate "all" fishing may "restrain
the fishing rights of all state citizens, e.g., regulations as to time and
manner of fishing, size of catch, etc.;" Puyallup supra. While the
State may not necessarily regulate the manner of catching fish, fish
traps, gill netting, etc. by Indians, the power to regulate size of catch
because of conservation seriously limits the scope of Indian rights.
Quality of Claim
There is also some controversy over whether or not Indians have
a right to fish which are raised in hatcheries but spawn in their streams.
In Puyallup the court reasoned that since fish programs funded by
the State are supported by user fees, it was unfair to non-Indians to
allow Indians to take one-half of the catch and to use gill nets. The
Puyallup court stated that the Puyallup tribe had no interest in
hatchery run fish other than those enjoyed by all citizens. Effectively,
there is total state regulation where hatchery run fish are involved.
The Puyallup were only entitled to one-half of the "natural" run
fish. The quality of the Puyallup claim to fish spawning in their waters
has been seriously diminished.
Although fish are spawned in hatcheries they do use the water
which Indians hold under private right. Water rights are rights to
the use of water. They are not rights to any particular corpus of
water. Therefore, State Fisheries use Indian water. There should be
no legal distinction between a sale of water for use in irrigation and
a sale of water for use in spawning. Because State fish use Indian
water, Indians should not be limited to State regulations, as have the
Puyallup.
It is ironic that State dams which have destroyed natural spawning
should work to deny Indians hatchery spawned fish. Not only have
States themselves, and through the Federal Government, taken
Indian water, but they also deny Indians the fish which they would
otherwise be entitled to, if their waters had not been interfered with
by Dams.
In addition, the Puyallup Court raised issues of equal protection
under the United States Constitution. Equal protection means that
for hatchery run fish, the "manner of fishing by any regulations for
the conservation of fishery must apply the same to Indians as to
non-Indians." Therefore, the manner of fishing may also be regulated
by the state. Equal protection, as applied to hatchery runs means
that in the name of conservation, a state may not only regulate the
size of the catch, but also the manner in which the fish are caught.
Of the thirty-two Indian reservations studied, many expressed
interest in fishery development, but also discussed the legal impedi-
ments involved. Those tribes which have previously adjudicated
their treaty fishin rights have undertaken more fishery development
than those who have not. Chehalis for example, is an Executive
Order tribe, and as such was not a party to Washington supra, involv-
ing treaty tribes. Tribes such as Swinomish and Makah were parties
to Washington. Now, however, they find that although their claim
to one-half of the fish catch will be honored, they still lack the financial
capital to fully exercise their rights. Other reservations have not
found it necessary to sue states over fishing rights. Lac du Flambeau's
fish hatchery is used to stock lakes within the exterior boundaries






63


of the reservations. For commercial and tourist related purposes,
expansion of rearing ponds and the hatchery is necessary.
Conclusion
In the past most tribes were prevented from developing their
fishery potential because states refused to respect Indian treaties and
frequently used their police power to prevent Indian fishing. Fishery
development was retarded. Because of continuing and recent litiga-
tion, Indian fishing rights have gained greater recognition, but suffi-
cient capital has not been available to assist tribes in meeting their
potential.
Today, the attack upon Indian fishery development is based upon
conservation, equality of treatment, and hatchery versus natural
fish runs. These attacks are aided by the reluctance of the Federal
Government to provide sufficient capital to exploit recognized fishery
resources. In addition to general harassment of Indians by state
police, the non-Indian commercial fisheries industry wants Congress
to either buy up native fishing rights or to change the treaties.
D, RESOURCE PROTECTION
The survey of reservations directed considerable attention to
protection and control of Indian-owned resources. The reservations
reported continuing difficulty in controlling resources such as oil,
gas, coal, uranium, sand and gravel, forests, rangeland, phosphates,
iron, and water. The Federal Government and the Secretary of the
Interior and Bureau of Indian Affairs in particular have acted as a
hurdle between Indians and their resources.
Although the Bureau of Indian Affairs is supposed to aid Indians,
very few examples of such assistance were reported. Some tribes
claimed that the Bureau was acting on the behalf on non-Indian
neighbors rather than on their behalf. Actual protection of Indian
property occurs mostly as a result of tribal action or tribally induced
Bureau of Indian Affairs action. The following discussion considers
four categories: (1) Infringements such as trespassing; (2) state
taxation; (3) Codes controlling land use; (4) Tribal opinion of the
usefulness of litigation as a method of protection.
All respondents were requested to fill out a table listing "the major
infringements against tribal resources and their cost to the tribe,"
and the major ones mentioned were against land. Unfortunately,
only 14 of the 32 reservations visited provided the list. One reason
for this low rate of response may well be the amount of detail in-
volved. In addition to asking for the type of infringement and the
resource damaged, other information requested concerned the dura-
tion of the infringement, the guilty party, the responsible party for
protection, the action taken, the outcome, the legal costs, and damages
collected, if any.
Trespassing
Eight reservations reported trespassing problems; two said that the
problem was "not major." Six reservations with major trespassing
problems represent 43 percent of those who responded to the question.
Of these, one had no data to describe the problem. One reported
problems with snowmobiles, another with hikers, another with






64


grazing. One reservation had extensive data on illegal rights of way.
This tribe estimated that approximately $9,000,000 had been lost to
the tribe because of illegal rights of way. The tribe owns land which
must be used by roads, pipelines, and railroads due to geographic
conditions.
Poaching
Nine reservations, or 64% of those responding to the question,
reported poaching. In none of the cases did the BIA act to prevent
the poaching. Tribal action was taken in two of the cases; other
tribes reported no funds were available to prevent poaching.
Federal Projects
Seven of the fourteen tribes reported that some type of federal
project had infringed upon their lands. Four of these were dams.
One was a Corps of Engineers jetty which diverted fish runs from
tribally controlled waterways and tidelands. Three reservations,
including one which had a dam, had recreational land taken for
federal use. Compensation was reported for one of the dam cases.
Since tribes need to control development on their land, a natural
move is to adopt codes. We asked tribes during our site visits to fill
out a chart describing the situation with codes on their reservation.
Task Force No. 2 (Tribal Government) asked the same question.
Table 1 shows the response among the tribes we visited. In this
table only six (6) tribes are omitted for non-response to the question
as a whole. Some did not respond to particular parts of the question.
Of the twenty-six tribes responding, twenty-one had at least one
code. Of the five with no codes, two had at least one under considera-
tion. Four of the five without codes were small reservations. One
of the small reservations reported it was considering one code to
control all matters we asked about. Most codes enacted regulate
fish and wildlife; seventeen of the twenty-six tribes regulate fish
and wildlife on their reservations. Zoning and land use planning
regulations were the second most numerous type of codes, with eight
tribes having full zoning ordinance.
Since our sample had five tribes with important minerals, it is
interesting to note that only one of them had a code to control such
development. Only one of those five were considering enacting a code.
The other two tribes considering such codes did not report known
reserves.
The Task Force did not attempt to assess the quality of the codes
reported. Nor did it attempt to determine if the tribes with codes
were successfully enforcing them. Four of the tribes with fish and
wildlife codes reported poaching problems which had not been solved,
while three of the tribes with fish and wildlife regulations reported
minor poaching problems. Unfortunately, six of the tribes with fish
and wildlife codes did not respond to our question about infringements;
such non-response inhibits reaching firm conclusions in either direction
about the success tribes have had enforcing their wildlife regulations.
Four of the seventeen tribes with such codes had problems enforcing
them, but there may be more than four having such problems.
We asked tribal representatives, "Do you think that litigation is the
most effective way to secure or protect your resource rights?" Of the
eighteen who were asked this question, nine said yes and nine said






65

no. Of the nine who said no, all suggested legislation as an altcr-ative
method. They indicated cost and uncertainty as problems with litiga-
tion. Most of them indicated national legislation, but some suggested
tribal and state legislation as well. In response to a question to identify
the outside interests which influence the choice of protection used,
most answering the question indicated non-Indian local people,
state governments, or corporations. A few indicated the federal govern-
ment was a problem also.
Miscellaneous
One tribe reported a salmon run had been cut off by a dam. A
California tribe was in the midst of a dispute over annexation of trust
land by a neighboring city; in this case the Solicitor's office was
taking action in a similar case in California and postponing enforcing
the case in our sample until the other was settled. Minerals protection
has been discussed in another section. We do not know the situation-
for timber.
Water Rights
Six of the reservations reported problems with water rights. Twa
cases were under litigation, one of which had been settled for monetary
damages. There was some evidence of BIA support, particularly in
the area of research.
Conclusion
Although fewer than half of the site visits produced responses to the
question about infringement on resources, the rate of infringement
among the respondents was great. Only two of the fourteen said
they had no major problems. Trespassing and poaching were im-
portant, as were federal projects. It is well known that water rights
are a problem, and so it is among the respondents. The Interior
Department took very little action to prevent any of the infringe-
ments reported by the tribes responding to the question.
TABLE 1
Large reservations Small reservations Total
If no-- If no- If no-
under under under
consid- consid- consid-
Type of code Yes No eration Yes No eration Yes No eratiorr
1. Control of development------------ 1 17 2 0 7 1 1 24 3
2. Control of water-....- 3 14 4 0 7 2 3 21 6
3. Control of fish and wildlife --------- 15 3 0 2 5 1 17 8 1
4. Residential zoning ----------------9 11 7 1 4 2 9 15 9
51 Industrial zoning -----------------8 9 5 0 7 2 8 16 7
6. General resource zoning -----------8 12 7 2 5 2 8 18 9
7. Building ----------------------5 14 3 1 6 2 6 20 5
8. Environmental regulations--------- 4 15 2 1 6 2 5 21 4
At least 1 code -------------------- 18 1 1 3 4 1 21 5 2

D.1. STATE TAXATION
Tribal governments and state governments are in direct conflict
over taxation. It is useful to distinguish two different types of tax, 1)
a tax on the product of land, and 2) a general business, income, or
sales tax. These two categories present different issues. A tax on mineral






66


production will, in the long run, fall upon the owner of the resource
rather than upon the developer. A tax on profits or income may fall
partially upon developers. Therefore, a state tax upon the products
of land, such as minerals, can be regarded as a tax upon Indian-owned
resources no matter who in fact pays the tax. The competition is
between the state as government and the tribe as landowner. A tax
upon business on a reservation is only partially a tax upon Indians if
the business is partly non-Indian owned. The conflict between a tribe
and a state in this case is not between landowner and state but
between competing governments looking for good revenue sources.
This will be elaborated.
Economic theory suggests that Indians as landowners, in the long
run, end up paying a large share of any tax assessed against the products
of land. The reason is that other factors of production can be switched
among alternative uses with more ease than can land. This enables
the owners of labor and capital to force the owner of land to bear the
taxes by threatening to depart, or by actually departing, from the
development process.' From this point of view, the person who actually
pays the tax, in the sense of writing out the check and sending it to the
government, is not always the same as the person who bears the tax,
in the sense of whose income is lowered when the tax takes effect.
Courts have recognized the relevance of this analysis, in terms of
who bears tax burdens, but they determine the validity of the tax by
who actually sends in the check, not whose income is reduced by the
tax. Generally, on reservations where a non-Indian sends in the check,
a state can tax: and where an Indian would send in the check, the
State cannot tax.
The Supreme Court drew this distinction in the recent Moe v.
Confederated Salish and Kootenai Tribes, decided April 27, 1976.
With regard to a sales tax, the court ruled that the tax was actually
paid by cigarette purchasers; although the retailer-an Indian-sent
the money in, he was not the one responsible for paying the tax. The
Montana statute provides that the cigarette tax "shall be conclusively
presumed to be (a) direct (tax) on the retail consumer precollected
for the purpose of convenience and facility only."
In our terminology, the "check for the tax" was written by the
retail purchaser, and merely conveyed to the State of Montana by
the Indian cigarette dealer. Had the tax been a direct tax on the
,dealer, presumably the Court would have ruled it invalid. The Court
said:
Since nonpayment of the tax is a misdemeanor as to the retail purchaser, the
competitive advantage which the Indian seller doing business on tribal land
enjoys over all other cigarette retailers, within and without the reservation, is
dependent on the extent to which the non-Indian purchaser is willing to flout his
legal obligation to pay the tax. Without the simple expedient of having the
retailer collect the sales tax from non-Indian purchasers, it is clear that wholesale
violation of the law by the latter class will go virtually unchecked. Moe v. Salish
avd Kootenai Tribes, No. 74-1656, 1976.
It appears that the way that Indians can avoid state taxation on
enterprises on Indian land is to be certain that courts rule that the
check is written out by Indians rather than by non-Indians. In Moe,
Montana's law did not make wholesalers or retailers liable for the tax.
I Shoup, Carl S., Public Finance (Chicago: Aldine. 1969), pp. 273-274.








Such language prevents tribes from asserting that the f ax is assessed
against an Indian. Perhaps a tribal strategy against this would be to
tax the purchaser also. Substantial uncertainty about the true juris-
dictional boundary between reservations and states will exist while the
two parties engage in legal maneuvers to determine who can tax.
Meanwhile, the tribe as landowner bears the tax, whether it can
collect it as a government or not. In addition, uncertainty of tax
jurisdiction creates costs which act as a tax, and which are therefore
born by the landowner.
As one might expect from this interpretation of the law, companies,
exploiting tribally-owned mineral resources, pay state taxes, par-
ticularly severance taxes. The most striking example comes from a
large Montana reservation, which is selling coal located on ceded
land for which the tribe retained mineral rights.
Between July, 1975, when the state tax went into effect and March,
1976, Montana collected $3,988,242. The tribe's royalties during the
same period was $1,270,530. The state's revenue amounted to more
than three times the tribe's revenue. The federal government took no
action to protect tribal taxation powers against the state.2
Should the tribe fail to displace the state tax, it would be unable in
future negotiation to obtain as favorable a change in royalty pay-
ments as in the presence of the state tax.
The situation was not as bad at this same reservation in regard to
taxation of oil and gas. For crude oil, Montana charges 2.1 percent
of the wellhead price for the first 450 barrels, and 2.65 percent for
all subsequent barrels. The tax on natural gas is 2.65 percent for all
production. Both also are charged a resources indemnity tax of 0.5
percent per year. The total tax for natural gas is, therefore, 3.15 percent
for crude oil, the total tax lies between 2.6 percent and 3.15 percent.
Indian landowners receive in the range of 12.5 percent to 16.6 percent
depending upon the lease.3
Indian income on reservations is less because states are able to
collect severance, wellhead, leasehold, license, possessory interest,
and other taxes charged against lessees of Indian land. Although
non-Indians may pay the tax, the burden of that tax is borne by
Indians as landowners. Should tribal governments attempt to tax
as well, they will succeed only in reducing their own royalties. (In
some cases, however, if the tribal taxes can be deducted directly from
a company's federal tax, the royalty will fall by less than the tax.)
Continued successful taxation by states in this manner will be a serious
obstacle to the development of Indian economic self-sufficiency.4 The
income of tribal governments in their role as landowners will be less,
as will be the income of individual Indians, as owners of allotments
and as beneficiaries of per capita payments and governmental services.
The question of general taxation of income and business raises
related but somewhat different issues. A fundamental power of a
government is the power to tax. Governments use this power both to
finance their own activities and to regulate the economy within their
jurisdiction. In a world of competing governments, the choice not to
tax is often a useful incentive in economic development strategy.
It is well known that different municipalities and states in the
United States compete with one another for the location of business






68

enterprise. If tribal governments are not able to clearly exercise
taxing authority within their jurisdictions, tribes will be hampered
in their competition with other governments.
State governments regard the possibility that tribes could create
"tax havens" within their borders as a serious threat to their own
revenue raising powers. To an extent, this is true; it is also true that
each state and the District of Columbia is a threat to the revenue-
raising powers of its neighbors. Businesses examine state laws in the
process of choosing where to incorporate and to locate. States with
high tax rates lose revenue when businesses choose to locate in a
neighboring state; the same would occur with Indian tribes. One must
ask, however, how many states would be seriously threatened by
competition with Indian tribes within their borders. Many businesses
are forced to choose their location by other factors. Tribal land is
limited, as are sites which are suitable for development. The impact on
tribal revenue and income is probably much more important than is
the impact on state income. This would be especially true if one
considers the impact on per capita income, since Indians are not
numerous.
In conclusion, state taxation within Indian reservations is a threat
to tribal sovereignty and to tribal income. If states successfully impose
their taxes, Indians will suffer income losses and economic develop-
ment efforts will be frustrated. Tribes should attempt to preempt
state taxation by levying their own taxes. They should also create
agreements with developers which keep the ownership of the minerals
and processing in Indian hands, so that state taxation will be frus-
trated by the identity of the taxed enterprise; this would require
contract-for-work or other such types of contracts. These are de-
scribed in the appendix on mineral agreements. It remains to be seen
whether the legal battles can be won by tribes. There is a danger that
the cost of those battles will be very great.

D.2. AN EVALUATION OF INDIAN WATER RIGHTS
Of the thirty-two Indian reservations covered in Task Force
Seven's economic survey, most indicated what their current water
use is, and the available capacity from existing sources, although they
failed to indicate what future water requirements will be. A number
of responses to the questionnaire stated that water was definitely
necessary for future economic development, although this relation-
ship was not documented. Some responses indicated that litigation is
contemplated, while others stated that they were actively engaged in
litigation over water rights.
There appears to be great diversity of thought on what constitutes
Indian water rights and on the need to inventory current water needs
and project future requirements. Apparently, some Indian tribes
2 As of July 7, 1976, the Secretary of the Interior had not acted on a proposed tribal taxation code, which
the tribe adopted in January 1976.
3 1 Iformation obtained from thi Division of Miscellaneous Taxes, Montana State Department of Revenue,
and th., tribe in question. No other tribes in our sample had significant production of oil and gas.
4 Another example of the monetary issue involved comes from testimony regarding a proposed leasehold
tax in Arizona. "Speaking in favor of the bill was the P1ima County Assessor, who argued that the state
would receive $9.5 million a year and Pima County, $5 million, from the leasehold tax. He said that the
tax would substantially reduce area property taxes." The Navajo Times, April 22, 1976. If the tax were
enacted and the county taxes are lowered, non-Indians in Pima County would benefit from a tax on the
income from the Papago Reservation.






69


believe that the water will always be there when they want it. The
Winters doctrine and other cases somewhat support this belief. Other
tribes may not be using very much water and fail to see why any
controversy exists. Still other tribes are locked into legal combat to
quiet title to their water rights.
This paper attempts to structure the water rights controversy and
to determine whether or not these rights are immune from state or
Federal interference or seizure. It is believed that all water rights
controversies come within the following structure.
The first question concerns the nature of the right to the use of
water. Water rights are usually referred to as Winters Doctrine
Rights. The following proceeds to clarify the doctrine of Indian
water rights. In United States v. Winans, 198 U.S. 371 (1904) the
Supreme Court noted that rights and interests not specifically granted
by Indian tribes in their treaties, were reserved. The Court recognized
that a treaty was not a grant of rights to the Indians by the United
States, but rather a grant of rights by the Indians to the United
States. Later, in Winters v. united States, 207 U.S. 564 (1907) the
Supreme Court declared that rights to the use of water were reserved
by Indians when they ceded large tracts of land to the United States,
even though no mention of a reservation of water rights was made
in the treaty. In terms of Winmans supra, the fact that water rights
were not mentioned means that they were not granted to the United
States. This is exactly the interpretation taken by the Winters court.
The Winters court also clarified that a state's entrance into the
Union does not divest tribes of their rights. Consequently, Winters
doctrine rights to the use of water have been recognized as interests
in real property. And, as interests in real property, they are entitled
to the same protection from abridgment and loss by the Federal
government as those obligations respecting the land itself.
May non-treaty tribes invoke the Winters doctrine? Many tribes
with waer rights problems are not treaty tribes. In United States v.
Walker River Irrigation District, 104 F. 2d 334 (CA9, 1939) the court
recognized that Executive Order reservations could have Winters
Doctrine rights. But there is a substantial difference between the
rights, title to which resided in the Indians and which they retained
by treaty or agreement, from those, title to which was in the United
States, but passed to the Indians when their reservations were created
by Congress or Executive Order. Indian rights to the use of water
under treaties are immemorial and unimpaired in character since
they have always resided in the Indians. But when Congress or the
Executive granted title to the Indians those titles are from the United
States subject to any interests outstanding when title was conveyed
to the Indians. See also Arizona v. California, 373 U.S. 546 which
recognized that Congressional Act reservations were entitled to
Winters Doctrine rights.
As a general rule Winters doctrine rights to the use of water apply
even if the tribe received title to the land from the United States;
therefore, treaty, congressional act, and executive order reservations
may invoke the Winters Doctrine.
Current controversy now focuses on whether non-Indians may
claim water under the Winters Doctrine. If non-Indian successors in
interest to Indian allottees may invoke Winters Doctrine rights to






70


the use of water, then tribal water is in jeopardy. Essentially, this issue
involves the controversy over whether Winters doctrine rights are
appurtenant to allotted land or whether the rights are held in common
by the tribe, separate from the land. The controversy stems from a
muddled opinion written by the Supreme Court in United States v.
Powers, 305 U.S. 527 (1939). The decision arose from an attempt to
enjoin the use of water by a non-Indian, who had succeeded to the
title to land from an Indian allottee. The court held that the non-
Indian succeeded to "some portion of tribal waters." But then the
court continued, "We do not consider the extent or precise nature
of respondents' (non-Indians) rights in the water. The present pro-
ceeding (being an action to enjoin and not to quiet title) is not properly
framed to that end," at p. 533. The decision is unclear because it
says that a non-Indian successor in interest is entitled to some portion
of tribal waters. This implies that Winters doctrine rights are ap-
purtenant to Indian land, irrespective of ownership. But then the
court says that it is not deciding whether or not a non-Indian successor
in interest has any Winters doctrine rights.
Currently, United States v. Walton, involving the Crow and Colville
reservations, is in litigation. The central issue is whether or not Walton
owns any individual right to the use of waters reserved under the
Winters doctrine, because he is a successor in interest to Indian
allotted land. The tribe claims that Walton does not, because it owns
all Winters doctrine rights to the use of water. If Walton wins on the
merits, the result could be massive claims on the waters of streams
traversing the reservations by non-Indians, claims of equal dignity
to those of the Indians. If this were to occur, then the trust asset of
probably the greatest value, Indian water rights, would be cata-
strophically depreciated.
If the tribe wins, it would mean that Winters doctrine irighrs are
separate from, rather than appurtenant to land, and that the right is
held in common by the tribe. If this is the case, then non-Indian suc-
cessors in interest would not be entitled to any portion of tribal waters,
but would come under state water law. This would be of positive
benefit to the tribe, but of questionable benefit to Indian allottees
should they desire to sell their land to non-Indians. Since the land
would carry no water right, the non-Indian successor would have to
apply to the state for an allocation of water. But since the application
is so late in time, that is, prior claims having been appropriated, it is
doubtful whether an allocation could be given. The result is that
Indian allotted land would carry two values. A lower value if sold to
a non-Indian because of no water rights, and a higher value to an
Indian or tribal purchaser because if retained in trust it has water
rights; therefore, greater value obtains.
Currently, the Solicitor's office in the Department of the Interior
and the Lands Division in the U.S. Department of Justice are taking
the tribe's position in the Walton case. They argue that Powers is not
dispositive of the above issue. The Powers decision's internal incon-
sistency does not compel the conclusion that the non-Indian successors
to Indian allottees own any individual rights to reserved waters.
There are also questions of when and under what circumstances the
doctrine may be invoked. Whenever tribes possessing Winters doctrine
rights have an increased need for water, they may assert their rights.








In the application of Winter, doctrine rights the cou1't: have recog-
nized that the Indians would of necessity need additional quantities
of water to meet their future needs.
What amount of water will be required for these purposes may not be deter-
mined with absolute accuracy at this time; but the policy of the Government to
reserve whatever water . may be reasonably necessary not only for present
uses, but for future requirements, is clearly within the terms of the treaties as
construed by the Supreme Court in the Winters case. Conrad Investrment Company
v. United States, 161 Fed. 829 (CA9, 1928).
The court in Conrad went on to state that other claims to water
were subject to modification by the tribes when conditions on the
reservation "at any time require such modification," at p. 835. The
Conrad decision encompasses any "useful purpose."
The same principle was declared by the Supreme Court in Arizona
v. California, 373 U.S. 546 (1962). There the court, relying upon the
Winters decision, stated that the quantities of water reserved for the
Indians were sufficient "to make those reservations livable." Although
Arizona discusses reserved water in terms of irrigible acreage, it is un-
likely that irrigable acreage is the maximum amount of water which
can be claimed under Winters, because of the tribes' paramount title.
In other words, "useful purpose" and "livable" indicate that water
demands which exceed irrigable acreage requirements must be satis-
fied. Irrigable acreage may be employed as a measure, but not as a
limitation. United States v. Ahtanum Irrigation District, 330 F. 2d 897
(CA9, 1964) supports the position that Indian Winters doctrine rights,
like the lands to which they are a part, may be used for any "beneficial
purpose." .
Indian tribes possessing Winters doctrine rights may assert those
rights whenever a need exists. Case law indicates that water usage is
not limited to farming or agricultural uses exclusively, although
irrigable acreage is employed as a measure. Practically any useful, or
beneficial purpose which makes a reservation more "livable" would
qualify for modification. The power to modify and divert water from
non-Indian uses is inherent in the private right ot the water. Indian
tribes may assert their rights at any time.
Most importantly, it is necessary that tribes know against whom
the Winters doctrine is effective. Immunity of Winters doctrine rights
from state and Federal interference or seizure has not been guaranteed,
although the Winters case would indicate to the contrary:
When the Indians made the treaty granting rights to the United States, they
reserved the right to use the waters, at lease to the extent reasonably necessary
to irrigate their lands. The right so reserved continues to exist against the United
States and its grantees, as well as against the state and its grantees. Winters, at p. 749.
(Emphasis supplied).
Indian Winters doctrine rights are immune from state interference
and seizure, but not immune from seizure by the Federal government,
even though the case so holds.
Winters holds that treaty reservations are immune from state
seizure. Since treaties are supported by the Supremacy Clause of
the United States Constitution, treaties are paramount to state law.
States are bound by all treaties made by Congress. In addition, many
State Enabling Acts respect Indian rights. "Rights reserved by
treaties such as this are not subject to appropriation under state law,


77-462--76-----6






72


nor has the state power to dispose of them, "Ahtanum, supra at p. 328.
Further, Federal Acts opening surplus rights to the use of water to
appropriation, are not applicable to Indian lands. See Federal Power
Commission v. Oregon, 349 U.S. 435 (1955).
As a general rule, whenever Indian tribes have asserted their
Winters doctrine rights to the use of water against states, they have
prevailed. In New Mexico v. Aamodt, Civ. Nos. 75-1069, 75-1106
(10th Cir. 6/19/76) the court upheld Pueblo de Nambe, among other
Winters doctrine claims. The court rejected the contention of New
Mexico that water uses by Pueblo Indians are controlled by state
water law based on the doctrine of prior appropriation.
General principles of state water law have limited application to
Winters doctrine reserved rights, Walker River, Arizona v. California.
Doctrines such as prior appropriation and abandoment by non-use
do not pertain to Winters doctrine rights, Aamodt, supra. Winters
doctrine rights are not riparian in character, because the concept of a
reserved right to Indian tribes is at variance with limitation inherent
in a tenancy in common. Furthermore, because Winters rights may be
increased in the future, Arizona v. California, Conrad, Anthanum,
they are not measured correlatively as are appropriative rights.
Indian Winters doctrine rights therefore are paramount in title,
private in right, and are superior to State claims on water.
But, are Winters doctrine rights effective against the United States?
Winters states that it is effective against "the United States and its
grantees," at p. 749. But, because the power of Congress is plenary
in nature it may appropriate property. Consequently, although the
Federal government may respect the fact that Winters doctrine rights
are reserved to Indian tribes, it is not prevented from appropriating
those rights by such recognition. The only constraint on the Federal
government is the Fifth Amendment to the Constitution, which
prohibits it from taking property without due process of law and
compensation. Effectively, the Federal government may appropriate
Indian Property if it provides just compensation.
The taking itself cannot be prevented because of Congress' plenary
power. Federal Acts provide the "due process of law" which allows
for taking. Indians get damages in the form of compensation, but
they do not get their water back. So although on the surface, Winters
doctrine rights appear to operate against the United States, in reality
they do not. Every Bureau of Reclamation project which has appro-
priated Indian water is an example of Federal taking.
Conclusion
It has been recommended that protection of Indian rights be re-
moved from the Department of the Interior because of the presence
of other agencies which compete for Indian resources. Apparently,
so the theory goes, if the conflict within Interior and Justice were
eliminated, then Indian rights would be more diligently protected.
While greater diligence is necessary, removal of conflicting interests
does not solve the problem of the Federal governments "taking"
power. Even If the Bureau of Indian Affairs and Indian legal repre-
sentation were independently consolidated into a new agency, that
would not diminish the power of the Federal government to appro-
priate Indian water through the Bureau of Reclamation, etc. Elimi-






73


nating conflicting interests from within Federal agencies is a worthy
and important goal, but the absence of such conflict does not mean
that competing agencies will conduct themselves any differently from
before. Competing agencies will appropriate more Indian water and
Indians through greater diligence and conflict-free legal representation
will sue to prevent such appropriations. The outcome remains the
same, however; Indians get damages and lose their water.
It appears that the only solution to this problem is hn Act which
applies to all Federal Acts which allow Indian water to be taken.
The Act would effectively prohibit all- governmental agencies from
taking any Indian water. Since it, appears that this solution may be
politically impracticable, an Act which makes taking subject to future
water requirements of Indians, might be a second best alternative.
This would require Indian tribes to plan and to document their future
water needs. Federal agencies could appropriate Indian water only
to the extent that it did not interfere with their potential needs.
Presently, Indian tribes rely on their Winters doctrine rights to the
use of water as a shield and a spear. They reason that whenever they
want water they can use this weapon against the states. But the real
danger is not from the states; it is from the Federal government.
Every judicial victory under the winters doctrine means that the
state loses. The result is a political victory, somewhat delayed, for the
states when the Federal government appropriates Indian water for
the States. Conceivably, Indians can use the winters doctrine as a
spear to deny states all water. But politically it is not a shield. Politi-
cally, the Federal government does what it cannot do judicially under
Winters; it balances competing needs and then appropriates water
for the states. New MY1exico v. Aamodt, supra, rejected the argument
which called for "a balancing of competing interests," because Winters
doctrine rights are paramount and prior to state claims. But politically,
the Federal government may still take Indian water provided it
makes just compensation. Compensation however, is not compensa-
tory if Indian lands may never be economically developed as a result.
The real danger lies in the present and in the future; that danger
is pragmatic. Whenever Indians push out the states, the Federal
Government can retaliate with a reclamation project for the states.
Much time and energy should be devoted to amending Federal acts
which currently allow for appropriation of Indian water.
E. INDIAN CAPITAL AND MANPOWER
In the preceding sections, the use of Indian physical resources-
land, minerals, timber, fisheries-by non-Indians was discussed. There
are reasons why these resources are used by others. Indians lack capital,
management skills, and manpower training to develop and use their
own resources. In this section, we will examine the adequacy and the
impact of capital, management, and manpower training that has been
available to the 32 reservations in the survey.

E. 1. INTERNAL INDIAN CAPITAL
The chief source of internal Indian capital is in trust funds. Indian
trust funds are divided into four classifications.






74


(1) Tribal Trust Funds
These originate from claim awards, sale or lease of tribal land,
minerals, timber, water, and interest from investments and funds in
the U.S. Treasury. According to 25 U.S.C. 161b, they are deposited
in the U.S. Treasury where they earn 4 percent simple interest unless
otherwise stipulated by treaty or a court. (25 U.S.C. 162a) author-
izes the Secretary to invest tribal funds. Given the extremely low in-
terest rates at Treasury, the Bureau of Indian Affairs Branch of In-
vestment has been investing these funds since 1968 in Treasury bills,
notes, bonds, and time certificates of deposit which earn higher in-
terest. During fiscal year 1975, the bulk of these funds $387.4 million)
were invested at 9.19 percent and earned $35.6 million, which is
considerably more than they could have earned if invested at 4 per-
cent simple interest.
(2) Indian Service Special Disbursing Agent
ISSDA Funds consist of individual Indian money (JIM) from
claims awards; money of mental incompetents; income from trust
land of individuals; income from operating funds; and income from
special deposit for advance payments from such things as timber
stumpage. These funds do not earn interest when deposited at Treas-
ury, but only if invested by the Bureau of Indian Affairs Branch of
Investments. In fiscal year 1975, $123.6 million was invested at 8.6
percent and earned $10.6 million. ISSDA funds also consist of Buy-
Indian Contract Advances. These are not invested by the Branch of
Investments.
(3) Indian Money Proceeds of Labor
IMPL is a small account containing a residue of pre-1928 money
which cannot be identified as belonging to any one tribe. It also
contains miscellaneous money from schools and agencies. This account
is controlled and used by the Bureau of Indian Affairs. These funds
do not earn interest when at Treasury, but only if invested by the
Branch of Investments. In fiscal year 1975, $9.4 million was invested
at 8.6 percent and earned $812,293. The interest from special deposits
in ISSDA is deposited in IMPL account and some tribes would like
this money disbursed directly to them instead of forfeiting it to the
Bureau of Indian Affairs.
(4) Alaskan Native Escrow
This contains income from the 100 million acres from which Alaskan
natives are making their selection of 40 million acres. Interest is paid
according to a floating interest rate pegged to short-term Treasury
rate at the time of payment, or funds may be invested by the Branch
of Investments.
For the purpose of our analysis we are interested in only the first
category of funds, tribal trust funds. These are the largest and the
ones available for tribal investment, whereas the other funds are
small and used for current expenses.
Control over tribal trust funds
The only effective control tribes exercise over their trust funds is
the decision to leave their funds in trust or to take them out of trust.






75


They exercise little or no control over collection and deposit, but have
some control over investment decisions. The particular way the
Secretary has chosen to fulfill his trust responsibility has limited the
amount of control tribes are able to exercise.
Funds originating from sale or lease of tribal land, minerals, timber,
and water are collected at the BIA agency level and sent to the area
office on a daily basis. The area office has 24 hours to deposit these in
a federal depository which transfers them to Treasury. At the deposi-
tory they start earning interest immediately and are available for
advance to the tribe or for investment. Theoretically, then, tribal
trust funds are available to the tribe 48 hours after collected if the
area director approves the tribal budget for their use. However, they
are not always collected promptly, accurately, nor deposited accord-
ing to the Bureau's regulations. From the time claims award money
is appropriated, it is invested and not available for disbursement
until the Bureau of Indian Affairs approves a tribal plan for dis-
bursement.1
For the past three years, as soon as tribal trust funds are deposited
at Treasury, they are automatically invested by the Branch of In-
vestments unless it is otherwise instructed. Only five tribes out of
195 with accounts have given the Branch specific authorizations on
what to do with their money. However, the Branch prudently contacts
the others through their area office investment coordinator when an
unusually large deposit is made and no word has been received by
the Branch. There is a great need for investment analysts to work
with the tribes in order to determine cash flow needs with respect to
their investment program. If unforeseen needs occur and a tribe pulls
its funds out of investment, it forefits interest. Because no one in
the office of Trust Responsibility is capable of evaluating tribal
investment plans, investment counseling should be done by the
Albuquerque office.
Presently, the Branch can invest tribal trust money only in financial
investments which are fully guaranteed, such as time certificates of
deposits, Treasury bills, notes, and bonds. Tribal trust funds may not
be invested in other government securities (FmHA, FHA, FHLB,
FLB, GNMA). This needless restriction by OMB is the subject of a
GAO report2 and two tribes have suits against the Bureau of Indian
Affairs for failing to invest in these other government securities.
The Branch cannot go into the stock or bond market because the funds
must be fully guaranteed. The rate of return on investments obtained
by thd Branch of Investments over the last ten years has on the
average exceeded that obtained on the stock market or on certificates
of deposit quoted in the Wall Street Journal.
The 100 percent security has not interfered with the return on tribal
trust funds, but it has interfered with where the money can be placed.
Many tribes would like the money invested locally, that is, they would
like time certificates of deposits from local banks. However, small
banks are not always able to accept tribal trust money because the
bank does not have the resources to guarantee it. Therefore, the bulk
of tribal trust funds are deposited in large financial centers.
Legal expenses may be paid from claims money as soon as it is appropriated.
2 Comptroller General of the United States, "Increased Income Could be Earned on Indian Trust Monies
Administered by the Bureau of Indian Affairs," General Accounting Office, April 28, 1972.






76


The Branch usually invests tribal trust funds according to the fol-
lowing criteria:
1. With the highest bidder.
2. With a bank selected by the tribe with approval of the area
director.
3. With a bank which has been allowed to match the highest bid
upon special request of the tribe.
If options (2) and (3) are not requested, the Branch invests the
funds according to the highest bid. If there is a tie for high bid, it
goes to the bidder located nearest the tribe.
During the course of our survey we have discovered two instances
where the area director denied tribes option (2), that is, to deposit in
a bank of their choice. In one case it is clear that the bank, American
Indian National Bank, could have offered proper collateral. In the
second instance, we could not determine the reason the area director
did not approve their request.
Thus, it appears that the only option that exists is to invest at
the high bid unless the tribe decides to pull their funds completely
out of trust and invest them independently. However, the tribe
must have the approval of the Office of Trust Responsibility. Once
the funds are taken out of trust, it is not clear if they may be put
back. The Branch of Investments has waited nine months (as of
March 1976) for a clarification of this point from the Solicitor's
Office. This is another indication that the Bureau of Indian Affairs
has no clear idea of what constitutes their trust responsibility. If
the tribe invests its own funds, it will not receive a 100% guarantee,
but only a normal federal insurance guarantee of $40,000. Only two of
the reservations interviewed had taken their money out of trust and
were investing it themselves. Most of the tribal chairmen said that
they lacked the expertise and that their people wanted their money
100% guaranteed.
When one examines the thirty-two tribal trust fund balances as
of December 1975 it is apparent why some tribes are unwilling to
invest them without a 100% guarantee (see Table 1). Some funds
are small in relation to the population, originated from a non-renew-
able source such as a judgment claim, and the interest is the only
reliable source of tribal income. This is especially true for tribes
whose physical resources were taken from them and their only
compensation was a meager financial one. Others have accumulated
large trust fund balances from the annual returns from their natural
resources. However, they, with two exceptions, are no more willing
than those with small balances to invest it themselves.
There are some recommendations which are readily apparent from
our brief discussion of the handling of trust funds. They are procedural
and statutory changes which in themselves will not solve the problem
of insufficient capital. Nevertheless, they should be mentioned:
1. ISSDA and IMPL accounts should earn the same interest as
tribal trust funds when deposited in the U.S. Treasury.
2. The ISSDA "special deposits" interest should go to tribal trust
funds accounts or directly to the tribe, not to IMPL accounts.
3. Iterest should be paid on accumulated interest in treasury ac-
counts. This can be done by chaining the words "simple interest" to
"compound interest."










4. The current 4 percent simple interest rate should be increased,
possibly to 6 percent compound interest.3

TABLE 1.-TRIBAL TRUST FUND BALANCES AS OF DECEMBER 1975

Trust funds
Reservations, ordered but not coded I Balance per capita Chief origin

SA I --------------------------------------------------------- $380,788 $1,046 Claims.
2------------------------------------------. 428, 309 653 Do.
3 --------------------------------------------------------- 32,413 68 Do.
SNA 4 --------------------------------------------------- 0
5 --------------------------------------------------- 0
6 ----------------------------------------------- 156,706 609 Resource.
7 ----------------------------------------------- 47,022 128 Do.
8 --------------------------------------------------------- 679,147 4,116 Claims.
9 ----------------------------------------------215,177 837 Resource.
10 ---------------------------------------------------------- 1, 142,799 2,885 Claims.
11 3,913 35 Resource.
LA 12 ---------------------------------------------- 867,474 191 Do.
13 ----------------------------------------------- 623,091 150 Claims.
14 ---------------------------------------------1,066,907 746 Resource.
15 ---------------------------------------------------------- 2,033,653 682 Claims.
16 ----------------------------------------------- 140,216 138 Resource.
17 --------------------------------------------------- 0-----------
18 --------------------------------------------------------- 96,979 72 Do.
19 --------------------------------------------------------- 8,550 1 Do.
20 --------------------------------------------- 2,906,649 1,845 Do.
21 ---------------------------------------------1,947,089 379 Do.
22 ----------------------------------------------- 499, 266 500 Claims.
23 ---------------------------------------------------------- 19,076,419 9,251 Resource.
LNA 24 --------------------------------------------- 6,953,243 1,443 Claims.
25 --------------------------------------------------------------------------------------
26 ---------------------------------------------------------- 1,307,400 161 Resource.
27 --------------------------------------------------- 0
28 --------------------------------------------10,907,879 10,290 Do.
29 -------------------------- 799,818 1,003 Claims.
30---------------------------------------------2 244,885 10 Resource.
31 ------------------------------------------------2-- 0------ 2Do.
32 ------...... _....... -------------..........1,495,012 257 Do.

Given that the information in this section is extremely sensitive, the reservations have not been assigned their usual
code number and have instead been listed indiscriminately.
2 Trust funds were withdrawn during year and are being invested by the tribe.
Source: Tribal trust fund balance statement for December 1975.

Other sources of internal capital formation
The other source of capital, outside of accumulated trust funds, is
annual revenue from tribal resources. In the first section of this chapter
these revenues were compared with the expenses of tribal government
administration.
Only eleven reservations had income sufficient to administer their
governments and invest in their own development. Was total internal
capital sufficient to promote the development of these eleven reserva-
tions? Only land consolidation costs have been estimated. Five of the

I There is some uncertainty on whether to peg the new rate at 6 percent compound interest or to suggest
a floating rate which would be based on the current rate of interest. Trust funds of other government agencies
sometimes earn interest according to the following formula: ". .. a rate which is the higher of the rate of 4
present per annum or a rate which is 0.25 percentage points less than a rate determined by the Secretary of
the Treasury, taking into consideration the current average market yield on outstanding marketable obliga-
tions of the United States with comparable maturities."
The formula establishes a floor of 4 percent. If the current market yield is 7.25 percent, the deposit would
earn 7 percent, the .25 percent is a penalty for the establishment of the 5 percent floor. The current average
market yield would be based on those intruments with maturities comparable to the trust fund deposits.
Therefore, short-term trust funds would receive an interest rate based on short-term current average market
yields. Long-term trust funds such as minor's judgment funds would receive an interest rate based on long-
term current average market rates.
Current average market yields could be determined semi-annually, quarterly, or monthly. It might be
better to have funds invested than a deposit at the Treasury at a fluctuating, interest rate. For example, if
the funds are invested at 6 percent compound interest, they earn 6 percent the entire period. If these fund
were on deposit at Treasury, they would earn the current market yield which could change semi-annually
or quarterly, so that one could start out at 6 percent and end up at the floor, 4 percent.
Very few government agencies have their money on deposit at the Treasury. Most of their money is in-
vested through Treasury in government securities. Indian trust funds have an apparent advantage in that
they can be invested in time certificates of deposit as well as government securities.






78


eleven reservations with significant amounts of internal capital were
allotted reservations. Only one of these can, and is, financing land
consolidation out of its internal funds. During the course of this study,
estimates of the capital necessary to fully develop Indian land, timber,
minerals and water could not be done. Until such studies are under-
taken, Indian capital needs cannot be adequately assessed.
Tribal control of other sources of internal capital
The fact that eleven reservations have large annual incomes does
not necessarily mean that they can or will invest it in their own
development. Two of the eleven make large annual per capita pay-
ments. Tribal governments justify per capita payments by pointing
to members' low per capita income. But such payments reduce the
pool of investment funds, and perpetuate the low per capita income
status. If reinvested in productive enterprises each member could
receive a greater return through permanent employment.
The tribe is not free to invest its annual timber, mineral, or leasing
revenues as it chooses. A tribe must submit a budget to the BIA be-
fore its money can be made available to it. This procedure was probably
designed to protect Indian people from the unscrupulous. However,
tribal governments should have their own internal safeguards to
protect against abuse. Tribes do have control over profits derived from
tribal businesses, recreational licensing, taxes, and when stipulated
by lease, income from agriculture and grazing. But, because of the
Bureau's pervasive control, tribes have even lost control over the use
of these revenues.
At Ft. Apache, for example, the Tribe consolidated its credit and
financing operations under the BIA-Tribal Revolving Credit Pro-
gram. But the BIA holds ultimate approval power through 25 CFR
91. The tribal council voted to invest timber enterprise profits in
a shopping center. It was clear that the transfer would not have im-
paired the timber enterprise. The BIA would not approve the transfer
because the timber enterprise had an outstanding loan with the RCP.
Since the enterprise was making repayments on schedule, one ques-
tions BIA's judgment. The reasonable borrower sees that paying off a
low interest loan during a period of inflation is foolish. The reasonable
borrower will make payments according to his fixed schedule. Why
should a tribe act unreasonably? Similarly, during periods of high
interest rates, a reasonable borrower would first try to finance his
needs internally. Why shouldn't tribes also act reasonably? If the
economic environment is such that there is high inflation and high
interest rates, the tribe should pay its loans on schedule and finance
its needs internally, if possible. The Bureau, however, while criticizing
the lack of tribal business acumen, prevents it from acting as any
reasonable borrower-investor would.
E.2. EXTERNAL CAPITAL AND MANPOWER DEVELOPMENT
While the majority of the sample reservations had little internal
capital to invest, external capital was available in limited amounts
through various government programs. One problem with this external
capital is that it could not be shifted to the most productive sectors
where it would have had the greatest return. Instead, it was tied to
various government programs, which Indians could take or leave.
Major investments in infrastructure and economic activities on thrity-
two reservations were documented for a period of ten years, 1965-1975.







79


In this section the distribution of such investment capital and its
impact in terms of income and employment will be examined.
Table 2 illustrates the distribution of capital among the various
sectors. It is striking to note that capital is very unevenly distributed
over the sectors. This is due to a combination of poor planning and no
control over outside capital flows. In every case, more than 50% of
investment capital has been spent for infrastructure. Examination of
infrastructural components, water, sewers, roads, telephones, electric-
ity, housing, and community buildings, indicated that housing was the
most important.
Table 3 indicates how many houses have been built by HUD
and BIA over the past ten years and gives their approximate value.
Housing infrastructure is necessary to support a healthy labor force.
The increase in available housing has probably been the single most
important factor in attracting people back to the reservation. While
reservation-urban migration is beyond the scope of this study, the
relationship between housing and rates of return should be examined.
In the short run, construction of housing can have an impact on the
local reservation economy, if Indian contractors and laborers are used.

TABLE 2.-DISTRIBUTION OF EXTERNAL INVESTMENT CAPITAL AMONG SECTORS (1965-75)
[in percent|
Agriculture
Reservation code No. Infra- and land Resources Manufac- Manpower
structure Planning consolida- development turing Commerce development
tion
(1) (2) (3) (4) (5) (6) (7)
3- 78.9 0.8 10.6 Agriculture.... 0 0.5 9.0
5 ----------------- 61.9 1.5 19.4 0 percent- 7.1 7.0 2.9
6 ----------------- 78.6 1.6 9.2 Agriculture'.... .1 6.7 3.6
9 ----------------- 50.9 6.0 33.4 0 percent ------- 0 1.0 8.2
15- _- 83.6 .7 0 3 percent ------- 1.4 14.5 .3
21- ---------------62.7 1.9 8.3 18.3 percent.... 0 0 8.6
22 ---------------- 79.9 .1 0 Agriculture 2 .... 4.1 11.5 4.2
26- 77.0 1.3 12.6 .....do2 -------- 2.3 .2 7.0
28- 88.9 1.1 1.4 0 percent_- 0 2.0 6.3
29- ---------------71. 7 1.5 10.9 Agriculture .... (3) 5.6 10. 1
31- 72.0 10.0 4.0 0 percent ------- 0 11.0 3.0
32- ---------------54. 5 2.2 .9 15 percent ------- ) 25.8 1.7
4- 71.4 4.8 0 0 percent ------- 0 1.6 22.0
7 ----------------- 66.4 1.6 24. 1 Agriculture .... 0 6.5 1.2
8--57.0 1.0 0 12 percent------ 0 23.0 8.0
10- 80.5 0 6.2 Agriculture2 ____ 4.2 0 12.9
12 ---------------- 60.5 2.9 .2 0 percent 0 30.7 4.5
13- ---------------95.2 .1 0 0.5 percent----- 1.1 1.7 1.2
16- ---------------93.5 1.8 .7 0 percent ------- 0 3.2 .5
17 ---------------- 94.5 1.4 1.0 2.5 percent----- 0 0 .4
19- 92.7 5.1 1.9 0 percent ------- 0 0 .2
27- 77. 1 (1) 2.9 0.7 percent----- 1.2 6.5 10.9
2 ---------------- 72.7 5.0 0 17. 9 percent .... 0 0 4.3
14- ---------------99.7 0 0 0 percent ------ 0 0 .3
30- ---------------38.1 5.4 .8 23. 2 percent .... 17.4 2.7 12.4
1-----------------100.0 0 0 0 percent 0 0 0
11 -81.2 2.4 8.2 ----do --------- 0 7.1 .8
18- ---------------83.0 0 17.0 ----do 0 0 0
20 ---------------- 92.7 1.4 5.5 -----------
23 ---------------- 74.2 2.4 --------------------------------------- 23.4
24.- 100.0
25- 92.0 .6 0 0 percent ------- 0 6.4 0
1 Investment capital includes all grants for physical projects and long-term loans.
s No other natural resource but land, and so, col. 3 and 4 should be combined. Col. 1-Infrastructure-water, and sewers,
roads, telephones, electricity, housing, and community building. Col. 2-Planning--planners and studies. Col. 3-Agri-
culture-land purchase, improvement (not maintenance), building and equipment. Col. 4-Resource--mining, forestry,
fisheries, primary and secondary activities. Col. 5-Manufacturing--industrial parks, buildings and machinery. Col.
6-Commercial-shopping centers, restaurants, motels, marinas, ski lifts, campgrounds. Col. 7-Manpower-OJT, AVT
IAT, CETA, skill centers.
SSRHCO.
4 Electronics.
6 Not available.
Source: From TF No. 7 reservation questionnaires.










TABLE Ill.-HOUSING CONSTRUCTION AND DEMAND ON 32 RESERVATIONS


Substandard houses


Number of


new BIA Value
homes of new
1965-75 BIA homes


Existing Houses in
houses standard condition
1975,
total Number Percent


Repair
Number Percent
(7)


New housing demand
Replacement
New Replace-
N umber Percent families ment


Cheyenne River -----------------------------
C row ---------------------------------------
Crow Creek ........................
Fo rt H all . ........................
Lac du Flam beau ...................
N ett Lake ----------------------------------
O m aha -------------------------------------
Rosebud ------------------------------------
Spokane ------------------------------------
Standing Rock ..............................
U m atilla .....................
W arm Springs -------------------------------
C olville -------------------------------------
Duck Valley ---------------------------------
Fort A pache --------------------------------
Fort McDermitt ...............
Hoopa Valley --------------------------------
H u a la p a i . . . . . . . . . . . . . . . . .
Laguna -------------------------------------
M akah -------------------------------------
M orongo .......................
San Carlos ----------------------------------
Chehalis -----------------------------------
Kickapoo -----------------------------------
Swinomish
Carson Colony ------------------------------
Havasupai ----------------------------------
M oapa -------------------------------------
N am be -------------------------------------
Picuris ------------------------------------
Prairie Island ------------------------------
Reno-Sparks --------------------------------


$15, 964, 200
6, 456, 625
6, 159, 375
368, 250
1,534, 325
1, 513, 500
3, 327, 750
4, 025, 700
0
13, 765, 050
1, 620, 500
1,155, 000
1,674,750
9, 945, 000
774, 500
735, 000
2, 050, 000
4,801,875
917, 000
527, 100
3,779, 000
1, 545, 300
657, 200
581, 400
791,200
705, 750
423, 450
1, 391, 000


20, 000
77,500
343, 898
77, 000
89, 437
58, 900
75, 500
68, 400
20, 000
32, 500
25, 500
59, 950
360, 000

184, 371
(1)
43, 200


50, 700
37, 000
12, 400
1, 200, 000


150, 000


957
597
336
556
161
93
235
1, 512
240
933
222
390
712
368
620
76
(1)
135
775
192
1,122
40
101
78
41
65
34
54
20
21
141


536 56 95 10 326 34 97 326
323 54 87 14 187 31 123 187
240 71 41 12 55 16 86 55
215 38 220 39 121 22 54 121
112 69 41 25 8 5 15 8
60 64 9 9 29 31 10 29
178 75 0 0 57 24 34 57
1,084 72 74 4 354 23 249 354
168 70 15 6 57 24 10 57
668 71 227 24 38 4 64 38
167 75 39 17 16 7 44 16
263 67 10 2 117 30 100 117
398 56 114 16 200 28 90 200
218 59 75 20 75 20 25 75
371 60 13 2 236 38 10 236
45 59 10 13 21 28 20 21
104 77 0 0 31 23 19 31
497 64 119 15 159 20 117 159
122 63 23 11 47 24 30 47
270 24 3 .26 849 76 25 849
33 82 3 7 4 10 28 4
70 69 5 4 26 26 8 26
68 87 4 5 6 8 30 6
26 63 5 12 10 24 6 10
38 58 0 0 27 41 0 27
32 94 2 5 0 0 20 0
47 87 7 12 0 0 15 0
20 100 0 0 0 0 25 0
14 67 3 14 4 40 0 4
126 89 5 3 10 7 10 10


I Not available. Source: Col. (1), from HUD housing authorities; col. (2) from prototype costs for area-average


Source: Col. (1), from HUD housing authorities; col. (2) from prototype costs for area-average
(1970-75) cost of 3-bedroom house; col. (3) and (4), from area BIA offices; col. (5) through (9),
BIA Housing Inventory for 1974.


Reservation


N umber of
new HUD
homes
1965-75


Value
of new
HUD homes


I Not available.






81

Housing construction has had little impact because non-Indian
-contractors were given the jobs. This situation has changed somewhat
during the last three years because of the increase of Indian contractors
and the creation of Indian action teams. Table 3 demonstrates that
the demand for Indian housing is still great. Indian contractors and
Indian action teams are still necessary. The problem of how to meet
existing housing demand is the subject of a special task force paper.
The remaining capital is spread among agriculture, resource develop-
ment 1 (minerals, timber, fisheries) manufacturing, commerce, and
manpower training. Most of the investment in agriculture is accounted
for by land consolidation which is examined above. Very little has been
invested in enterprises which process and refine raw materials such
as minerals, timber, or fish. There has been some development of
Indian commerce-restaurants, gas stations, shopping centers, recrea-
tional facilities. The majority of the commercial capital has been
invested in motels, marinas, ski lifts, etc.,--which employ few people
and serve non-Indians. Due to their isolated locations and poor
management, they have been unprofitable.
Table 2 indicates that a considerable portion of external capital has
been directed to manpower programs such as On-The-Job Training
(OJT), Adult Vocational Training (AVT), Comprehensive Training
and Employment (CETA), and Indian Action Teams (TAT). The
latter two programs account for most of the funds.
There was a dramatic increase in FY 1976 in both programs which
is not recorded in the table. CETA funds are currently being used to
create temporary jobs rather than for training. In contrast, Indian
action teams are trained, usually in construction skills, as they im-
prove and repair existing infrastructure. In the future, probably no
less than 10 percent of external capital will go to "manpower employ-
ment." On one reservation 22 percent of the outside capital has been
invested in manpower programs but little has been invested in agri-
culture, resource development or manufacturing. Training without
creating permanent jobs will not solve low per capita income.
E.3 IMPACT OF INTERNAL AND EXTERNAL CAPITAL ON EMPLOYMENT
AND INCOME PER CAPITA
The impact of increased investment can be measured by examining
changes in income per capita and employment. Both should increase
with the increase in investment. The task force looked at income and
employment figures for the 32 reservations for the time period 1967-
1975. Table 4 compares US Census 1970 per capita income with BIA
1975 per capita figures (See Col. 1 and 2). In fifteen cases out of the
twenty for which comparative data exists, there appears to have been
an increase in income. The figures should be examined closely. U.S.
Census figures are obtained from surveys of individuals. It is an
accepted fact that the U.S. Census inadequately surveyed Indian
people.
The total number of Indians recorded was 792,930, which is probably
an under-estimate. For example, Navajo population was reported as
96,743, while Navajo tribal estimates indicate 150,000. Whatever the
defects of Census figures, they are surpassed by the defects of the
1 Resource development here means investment in the processing of raw materials.







82

Bureau of Indian Affairs' statistics. The Bureau calculates per capita
income by summing all known sources of income, including govern-
ment programs, and divides this by the number of residents. BIA
estimates include income which was never received by individual
Indians, because it was either earned by non-Indians, or used, invested,
or saved, by the tribal government.

TABLE 4.-INCOME PER CAPITA AND UNEMPLOYMENT

Percent
1970 U.S. 1975 BIA 1967 BIA 1970 BIA 1975 BIA 1970 U.S. 1970 BIA
census per Unem- unem- unem- census unem-
per capita capita ployment ployment ployment unem- ployment
Reservations income income ployment
(1) (2) (3) (4) (5) (6) (7)

Cheyenne River----- $918 $1,480 25 32 27.8 18 32
Crow--------970 4,140 28 34 38.6 11 34
Crow Creek ------------ 768 2,140 66 65 45.6 30 65
Fort Hall---------1,373 1,420 45 42 50.0 16 42
Lac du Flambeau ------- 1,242 990 17 37 36.1 9 37
Nett Lake -------------- 1,292 1,170 53 60 60.8 17 60
Omaha -----------------792 1, 980 50 44 55.2 0 44
Rosebud--------------- 846 1,510 56 37 37.9 48 37
Spokane--------------- 1,282 2,130 27 74 29.5 47 74
Standing Rock ---------- 1,002 1,470 47 42 40.0 29 42
Umatilla --------------- 1,161 1,560 30 20 43.3 17 20
Warm Springs -----------1,625 5,450 41 28 8.3 10 28
Colville------1,947 3, 340 (1) 49 44.2 30 49
Duck Valley------------ 1,204 1,050 42 42 36.9 29 42
Fort Apache------------ -876 (1) 38 56 42.0 13 56
Fort McDermitt --------- (1) 1, 220 43 78 52.0 (1) 78
Hoopa Valley ----------- 2, 225 5, 560 22 61 7.3 21 61
Hualapai ---------------1,218 1,840 82 46 16.2 14 46
Laguna ---------------- 1,345 1,870 47 35 18.8 6 35
Makah-----------------2,341 1,750 36 45 34.9 38 45
Morongo---------------- (1) (1) 17 8 24.5 (1) (1)
San Carlos --------------687 1,300 34 39 50.7 13 39
Chehalis--------------- ) 800 40 27 45.7 (1) 27
Kickapoo -------------- (1) (1) (1) (1) 20.5 (1) (1)
Swinomish ------------- 1,122 1,010 39 43 43.9 10 43
Carson Colony ---------- () ( ()
Havasupai ------------- (1) (1) 90 40 77. (0
Moapa ----------------- ( (1) 15 45 50.0 (1) 45
Nambe ---------------- (1) 2,480 67 33 27.7 0 33
Pitures- (1) 1,060 57 44 68.7 0 44
Prairie Island---------- (1) (1) 32 53 43.4 (1) 53
Reno-Sparks ----------- (1) () (1) (1) 62.9 (1) (1)

I Not available.
Source: U.S. Census 1970, unpublished data. BIA Labor Force Reports-1967, 1970, 1975.

The apparent uselessness of per capita income data is not overly
disturbing because per capita income as a measure of economic devel-
opment is far from satisfactory. It is not a good measure of actual
welfare because it indicates only what each person's income would be
if all income were equally distributed. In actuality, on reservations
as in the rest of the world, there are substantial discrepancies between
the wealthiest and the poorest individuals. A more meaningful
indicator of the economic position of a group is its rate of unemploy-
ment. It was the intention of the Task Force to measure changes in
unemployment on the various reservations from 1967 to 1975 to
determine whether increased investment had any impact on lowering
unemployment.
The period 1967-1975 was chosen because it appeared to be a high
point in terms of the availability of external capital. Examination
of BIA unemployment data for 1967-1975 (Col. 3-4-5) did not reveal
any consistent pattern. Of the twenty-eight reservations with corn-






83


parative data, unemployment rates for seventeen were actually lower
in 1967 than in 1975. In the remaining eleven cases, unemployment
had declined in 1975. The pattern of increase and decrease is so erratic
that no attempt was made to correlate them with successive increases
in investment. A further deterrent to correlation was due to unrelia-
bility of the data base. The BIA Labor Force statistics are compiled
on an annual basis by the agency or area office. The agency does not
take a household survey to establish these figures but merely adjusts
the previous year's figures to reflect any changes it thinks may have
occurred. The Bureau's justification for lack of accurate statistics is
twofold. One, it claims lack of personnel. Two, its response through its
representative is sufficient, "What good are accurate statistics?"
It is disheartening that there is no determination on the part of
BIA officials to accurately document the situation. If accurate unem-
ployment figures are not collected from year to year, how can one judge
the effect of government programs, particularly manpower programs?
Good statistics are not ends in themselves but invaluable to evaluation
of federal programs and policy. Indian income and employment
statistics are used by the Department of Labor to determine Indian
fund allocation under the Comprehensive Traini ng and Employment
Assistance Act. The officials administering this program know the
US Census figures and BIA figures are unreliable. Nevertheless, they
are unable to collect their own data and so rely on Census and BIA.
There is no excuse for basing federal program planning and funding
on an unreliable data base.
A second intent was to compare the Indian rates of unemployment
with US Census rates for the nation. While this comparison is often
made by respected scholars, it is a falacious comparison. The BIA
uses a different definition of employment from the US Census.
The Census defines an unemployed person as one who has been seek-
ing work within the four week period previous to the interview. The
BIA definition includes those seeking work as well as those not seeking
work but who are employable. This gives the BIA a larger labor
force figure and inflated rates of unemployment. For example, the
BIA Labor Force Report, April 1975, reported the labor force of
Standing Rock as 1229 of which 737 were employed, and 492 were
not employed. Of the 492 unemployed, 320 were seeking work.
The BIA rate of unemployment was (429/1229) 40 percent. If we use
the US Census definition and subtract out those not seeking work
(172) from the labor force and from those unemployed, we obtain a
lower rate of unemployment (320/1055) 30 percent.
The BIA is aware that it defines unemployment differently but it
justifies the difference by saying that the nature of job search is
different on the reservation and so the U.S. Census definition has
little relevance. On the reservation there is almost perfect job infor-
mation. Everyone knows when there is a job opening and therefore
does not have to search continuously. Therefore, if a Census taker
asked an Indian, "Have you looked for a job in the past four weeks?"
he might reply no because there had been no job openings and being
rational he wouldn't seek what didn't exist. If BIA is correct, then
the U.S. Census figures for American Indians are underestimates,
while BIA figures are overestimates (see Columns 6 and 7, Table 1).
The truth is somewhere in between. Possibly for the 1980 U.S. Census,






84


the question should be modified for American Indians. They should
be asked, "When job opportunities occur, do you seek them?" In this
way the U.S. Census might be able to more accurately determine
who is to be included among the unemployed.
As for the BIA, its data base will remain inaccurate and useless
for any comparative purpose of determination in the allocation of
federal grant money and for program evaluation until it is actually
based on household surveys, and uses the same definition as the U.S.
Census.
There is an urgent need to develop a uniform, consistent and ac-
curate data base now, so that the effects of government programs and
all expenditures on development can be measured.

E.4. STRUCTURAL CHANGES NECESSARY TO INCREASE IMPACT OF
EXTERNAL CAPITAL 2
In the absence of reliable data on income and employment, it was
impossible to analyze the impact of the inflow of federal funds in the
form of grants and loans.
Given the fact that unemployment rates remain high, one would
assume that the impact has been minimal. This suspicion is con-
firmed by the GAO study of the White Mountain Apache where it
was able to adequately trace the inflow and distribution of federal
expenditures.
The GAO study developed a measure of the value of the total out-
put of goods and services produced by the reservation economy
which it called gross reservation product (GRP).
However, GRP does not show what determines changes from one
year to the next. To understand the reason for changes in GRP, it is
necessary to calculate a multiplier. A multiplier is a factor which
shows how much GRP changes as a result of a change in governmental
expenditure. To illustrate, if the government spends an additional'
$1,000 in the local economy and the multiplier is 1.5, one can expect,
that GRP will increase to a level of $1,500 ($1,000 X 1.5) as a result
of the government's expenditure.
This increase in GRP is a multiple of the original expenditure be-
cause of the following events. Increased governmental expenditures
provide increased incomes for both governmental employees and the
producers of governmental goods and services. Most of this increased
income is likely to be spent on the reservation for additional goods
and services. However, part of the increased income is likely to be
either saved or spent off the Reservation-thus, no longer contributing
to GRP. For the part of increased income spent on the Reservation,
those who receive it will spend it again (but again part will "leak-out"
through savings or external spending). This process continues until
the initial expenditure reduces to zero. The end result is a multiple
increase in GRP as the result of new governmental expenditure.
GAO calculated a multiplier of 1.3 for Ft. Apache using the accepted
formula developed by economists. This multiplier is lower than that
which has been calculated for other communities in the United States
by other studies. Generally, the more isolated and the smaller the
2 This section was written by Jim IIedrieks and Barry Anderson, Gcneral Accounting Off.








for this is that smaller communities depend much more heavily on
imports from outside so that much of the increase in external govern-
mental expenditure in the community "leaks out" of that community
through payments for imported goods and services. GAO found that
per capita money income to Tribal members was only $1,418 in 1972
compared to $4,478 for the nation in that, year. The money income
"gap" between the Reservation and the nation of $3,000 measured
how far the Reservation fell below the nation in terms of economic
well-being. The magnitude of the economic problem from an overall
Reservation standpoint is illustrated by the following analysis showing
the approximate scale of governmental expenditures needed to in-
crease Reservation per capita incomes to the national level.
The total personal income received by Reservation Apaches aver-
aged only 22.6 percent of GRP for the five years of the GAO study.
Another large proportion of GRP (about 25 percent) went into the
incomes on non-Apaches working on the Reservation. Exact data
were not available on the recipients of the remaining one-half of
Reservation GRP, but it apparently went to business and govern-
ment purchase of goods and services off the Reservation, capital
investments and inventories, and other expenditures not directly re-
sulting in increases in Apache incomes. Thus, there is far from being
a one-to-one correspondence between increases in GRP and increases
in Apache money incomes; in fact, GAO estimated that only $.226
out of every $1.00 in GRP goes directly into Apache incomes.
An increase in total personal income to Apaches of about $20
million was necessary to lift all 6,520 Apaches to the National level
of per capita income. Since the personal income to Apaches averaged
only 22.6 cents of every dollar in GRP it would take an $89 million
increase in GRP (1.0/.226X$20 million) to bring Apache incomes
to National levels. However, as has been shown in the preceding
section, when the Government attempted to increase GRP through
increases in expenditures, there is a multiplier effect on GRP. That is,
an increase in expenditure results in a greater than proportionate in-
crease in GRP. The Fort Apache multiplier has been calculated to
be 1.3. Applying this multiplier to the needed increase in GRP
(1.0/1.3X$89 million) results in an estimate that Government ex-
penditures must be increased by about $69 million to close the income
gap on the Reservation. This amount would represent a very sub-
stantial increase in Governmental expenditures over the 1972 expendi-
ture level of $22.2 million by Federal, State, and local governments.
GAO's findings have obvious implications. Federal expenditures
have had a lesser effect than what might otherwise be expected,
because of certain structural weaknesses which are common to all
reservation economies. The fact that non-Indians control reservation
economies means that Indians receive only Y to Y2 of federal
expenditures.
The effect of these expenditures is further diminished by a low
multiplier or the fact that Indians spend their income in non-Indian
establishments on or off the Reservation. Thus, the federal expendi-
tures accrue to others or "leak out." The federal expenditure impact
on Indian income and employment is reduced. This situation can be






86

community, the smaller its multiplier becomes. The principal reason
changed only by returning control to Indians over their own econ-
omies. Dumping capital or federal funds into reservation economies
will have little effect unless the capital is directed in such a way as to
help Indians gain control of their economies.
For example, when capital is invested in infrastructure, Indian
contractors and laborers should be hired. Capital should be invested
in the commercial sector so that Indians can buy on the reservation
from other Indians and thus keep the federal dollars circulating.
Capital should also be invested in job producing enterprises.










CHAPTER IV


A. FEDERAL GOVERNMENT POLICIES AND PROGRAMS
The development by Indians of their reservations requires not
only financing and assistance from the Federal Government, but an
active effort on the part of the Government to demonstrate that it
has changed its ways. The long history of Government control and
manipulation of Indian lives and resources has created a structure
which promotes survival rather than developmental goals. Con-
gressional plenary power is awesome, and its fulfillment of the trust
responsibility requires support of development far beyond what is
being done.
Development is not an easily defined term. This is so because each
society must define what direction its own development is to take
and toward what goals it seeks to develop. The essence of development
as used here is not a quantifiable, monetized level, but a sustained
and eventually self-sustaining exercise of control over their own
lives by Indians. The Federal Government must heavily support
Indian Development, but it cannot do Indian Development.
As detailed elsewhere in this report the Government must provide
capital, support for the training of human resources and adequate
physical infra-structure. These are essential factors of development.
At the same time it must ensure that these factors can be freely
combined by Indians, utilizing their own resources without inter-
ference and with the assurance that success in the endeavor will not
diminish their rights.
Examination of Government programs and their policies relating
to development has identified a number of basic policy issues which
must be resolved. Some issues are more difficult to resolve than
others. Government commitment is what is necessary.
POLICY ISSUES
1. Trust responsibility and development
Debates over whether the trust responsibility encompasses a duty
to develop are ultimately less important than the implicit conflict
which now exists between poorly articulated policies of trust responsi-
bility and development. As enacted into laws over past decades, trust
responsibility has been expressed as a mechanistic and overly paternal
responsibility to protect Indians and their resources from Indians.
While this has been elaborately developed into a maze of laws and
codes, the core of the responsibility-the protection of Indian sover-
eignty and property-has been left open to erosion, theft, and abuse
by individuals, states, and the Government itself. The pitiably weak
policy of allowmig Indians to develop over the past 15 years cannot be
reformed without correcting the Government's policy on trust re-
sponsibility. To do this the Government must enact clear and un-
ambiguous laws which affirm the basis of its trust responsibility--the
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77-462-76-7






88


protection and preservation of Indian sovereignty and property7-and
the essential relation of the Federal Government to tribes. This should
also reaffirm the Government's responsibility for providing services
to reservations based on treaties, laws, and the fundamental necessity
of upholding tribal sovereignty.
The massive accumulation of laws, codes, and directives based on
over 100 years of paternalism must be carefully but resolutely reduced
to conform to the needs of Indian peoples for protection and assistance.
With these conditions the Government's policies supporting develop-
ment could fully mature.
2. Termination and development
The concept that termination of Federal recognition of tribes is
somehow related to the level of tribal development stems from the
misunderstanding of trust responsibility, as discussed above. Termi-
nation as a reward for development is muted in current legislation,
but remains as a very real threat. In the minds of those who support
termination, development has become a modern substitute for the last
century's goal of civilizing Indians. The fundamental difference
between development and "civilization" or assimilation is that devel-
opment is the expression of the aspirations of the people who axe
dcveloping, not necessarily their achievement of the standards and
lifestyle of the wider society around them. Unless all threat of termi-
nation and reduction of rights and services is removed, the Govern-
ment's support of development will remain a futile exercise for both
Indians and the Government.
3. Needs versus rights
The rapid increase in Governmental expenditures for minority,
poverty, and disadvantaged groups in the United States has led to
another policy confusion. Indians are clearly a minority, poor, and
disadvantaged. As such they are clearly eligible for programs and
attention directed at these characteristics. As a source of assistance
and support for individual Indians, and a supplementary source of
services for tribes, this presents problems only in terms of the adinis-
tration of many of these programs by states.
Indians are, however, unique as a group within the United States.
As the original inhabitants and possessors of the continent, their
treaties and the long process of attrition and their forced sale of most
of their lands has left the Federal Government with exceptional re-
sponsibilities to them. These are not contingent upon their numbers,
poverty, or present status, but upon their being Indians. The Govern-
ment's responsibility to tribal authorities is only properly carried
out through enactments which respect tribes' standing and sover-
ignty; not through programs incorporating criteria of needs as
qualifications.
This policy confusion repeats the same pattern as termination. It
operates, however, in a more insidious way in terminating services
and subsidies at a point most likely to frustrate both the individual
or tribal recipient and the Government. Both parties end up being
convinced, for the wrong reasons, that their preconceptions of the
other were correct.
Implementation and administration
The focus of the Task Force's efforts have been far more on policy
inl) emICMn tation I thai policy formation. The conflicts and confusions