# Cotton Petroleum Corporation v. New Mexico

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## Dissenting Opinion

    Blackmun
United States Supreme Court
490 U.S. 163
Cotton Petroleum Corporation v. New Mexico
No. 87-1327 Argued: Nov. 30, 1988. --- Decided: April 25, 1989
Syllabus
Pursuant to authority granted by the Indian Mineral Leasing Act of 1938 (1938 Act), the Jicarilla Apache Tribe (Tribe) leased lands on its New Mexico reservation to appellant Cotton Petroleum Corp. (Cotton), a non-Indian company, for the production of oil and gas. Cotton's on-reservation production is subject to both a 6% tribal severance tax and appellee State's 8% severance taxes, which apply to all producers throughout the State. In 1982, Cotton paid its state taxes under protest and then brought an action in state court under, inter alia, the Commerce Clause of the Federal Constitution, contending that the state taxes were invalid on the basis of evidence tending to prove that the amount of such taxes imposed on reservation activity far exceeded the value of services the State provided in relation to such activity. The Tribe filed a brief amicus curiae arguing that a decision upholding the state taxes would substantially interfere with the Tribe's ability to raise its own tax rates and would diminish the desirability of on-reservation leases. The trial court upheld the state taxes, concluding, among other things, that the State provides substantial services to both the Tribe and Cotton, that the theory of public finance does not require that expenditures equal revenues, that the taxes' economic and legal burden falls on Cotton and has no adverse impact on tribal interests, and that the taxes are not pre-empted by federal law. The State Court of Appeals affirmed. This Court noted probable jurisdiction and invited the parties to brief and argue the additional question whether the Commerce Clause requires a tribe to be treated as a "State" for purposes of determining whether a state tax on nontribal activities conducted on a reservation must be apportioned to account for taxes the tribe imposed on the same activity.
Held: The State may validly impose severance taxes on the same on-reservation production of oil and gas by non-Indian lessees as is subject to the Tribe's own severance tax. Pp. 173-193.
(a) Under this Court's modern decisions, on-reservation oil and gas production by non-Indian lessees is subject to nondiscriminatory state taxation unless Congress has expressly or impliedly acted to pre-empt the state taxes. See, e.g., Helvering v. Mountain Producers Corp., 303 U.S. 376, 386-387, 58 S.Ct. 623, 627-628, 82 L.Ed. 907. Pp. 173-176.
(b) The state taxes in question are not pre-empted by federal law, even when it is given the most generous construction under the relevant pre-emption test, which is flexible and sensitive to the particular facts and legislation involved and requires a particularized examination of the relevant state, federal, and tribal interests, including tribal sovereignty and independence. The 1938 Act neither expressly permits nor precludes state taxation, but simply authorizes the leasing for mining purposes of Indian lands. Moreover, that Act's legislative history sheds little light on congressional intent. The statement therein that pre-existing law was inadequate to give Indians the greatest return for their property does not embody a broad congressional policy of maximizing tribes' revenues without regard to competing state interests, but simply suggests that Congress sought to remove disadvantages in mineral leasing on Indian lands that were not present with respect to public lands, which were, at the time, subject to state taxation. Montana v. Bla kfeet Tribe, 471 U.S. 759, 767, n. 5, 105 S.Ct. 2399, 2404, n. 5, 85 L.Ed.2d 753, distinguished. The fact that the 1938 Act's statutory predecessor expressly waived immunity from state taxation of oil and gas lessees on reservations demonstrates that there is no history of tribal independence from such taxation, while the 1938 Act's omission of that waiver simply reflects congressional recognition that this Court's intervening decisions had repudiated the pre-existing doctrine of intergovernmental tax immunity, under which such state taxation was barred absent express congressional authorization. White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665, and Ramah Navajo School Bd., Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832, 102 S.Ct. 3394, 73 L.Ed.2d 1174, are distinguished on the ground that, here, the State provides substantial services to the Tribe and Cotton that justify the tax; the tax imposes no economic burden on the Tribe; and federal and tribal regulation is not exclusive, since the State regulates the spacing and mechanical integrity of on-reservation wells. Pp. 176-187.
(c) There is no merit to Cotton's contention that the State's severance taxes-insofar as they are imposed without allocation or apportionment on top of tribal taxes-impose an unlawful multiple tax burden on interstate commerce. The fact that the State and Tribe tax the same activity is not dispositive, since each of those entities has taxing jurisdiction over the non-Indian wells by virtue of the location of Cotton's leases entirely on reservation lands within a single State. That the total tax burden on Cotton is greater than the burden on off-reservation producers is also not determinative, since neither taxing jurisdiction's tax is discriminatory, and the burdensome consequence is entirely attributable to the fact of concurrent jurisdiction. The argument that the state taxes generate revenues that far exceed the value of the State's on-reservation services is also rejected. Moreover, there is no constitutional requirement that the benefits received from a taxing authority by an ordinary commercial taxpayer-or by those living in the taxpayer's community-must equal the amount of its tax obligations. Pp. 187-191.
(d) The express language, distinct applications, and judicial interpretation of the Interstate Commerce and Indian Commerce Clauses establish that Indian tribes may not be treated as "States" for tax apportionment purposes. Pp. 191-193.
106 N.M. 517, 745 P.2d 1170 (1987), affirmed.
STEVENS, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, O'CONNOR, SCALIA, and KENNEDY, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which BRENNAN and MARSHALL, JJ., joined, post, p. 193.
Daniel H. Israel, Denver, Colo., for appellants.
Harold D. Stratton, Santa Fe, N.M., for appellees.
Justice STEVENS delivered the opinion of the Court.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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