/ o o 7

K 4 8 LEASES INVOLVING THE SECRET ARY OF THE INTERIOR

AND THE NORTHERN CHEYE NNE INDIAN RESERV ATION

GOVERNMENT JM EN TS 

Storage 1 3 1980

F A R R E LL- L IB R A R Y

KANSAS oIATE UNIVERSITY H E A R I N G

BE FO RE THE

SELECT COMMITTEE ON INDIA N AFFAIRS 

UNITED STATES SENATE

NINE TY -SI XT H CONGRESS

SECOND SES SIO N

ON

S. 2126

RELATIN G TO CERTAIN LEASES INVOLVIN G TH E SECR ETARY OF TH E IN TE RI OR AND TH E NO RTHERN CHEYENN E 

IND IAN RESERVATION

MARCH 28, 1980

BILL INGS , MONT.

Pr inted fc r the use of the Select Com mittee on In dian Aff airs

63-275 O

U.S. GO VE RN ME NT PRIN TIN G OFF IC E 

W ASH IN GTO N: 1980
u

n

SELECT COMMITTEE ON INDIAN AFFA IRS

JOHN MELCHER, Montana, Chairman

DANIEL K. INOUYE, Hawaii WILLIAM S. COHEN, Maine

DENNIS DkCONCINI, Arizona MARK O. HATFIELD, Oregon

Max I. Rxchtman, Sta ff Director

(II)
CONT E N T S

Page

S. 2126_________________________________________________________ 3

WITNESS ES

Chestnut, Steven, attorn ey for the No rthern Cheyenne Tribal Council— 32

Dahlstrom, Clint, vice president and general manager, Chevron Resources

Co_____________________________________________________ _____ 19

Ferrand, Chris, director of corporate planning, Peabody Coal Co., Billings,

Mo nt_________________________________________________________ 13

Harrison, David, Acting Director, Office of Trust Responsibility, Bureau

of Indian Affairs_______________________________________________ 7

Haughey, Jim, attorn ey representing Peabody Coal Co------------------------ 13

Portman n, A. Frank, director, Federal Affairs, AMAX Coal Co------------- 17

Prepared sta temen t----------------------------------------------------------------- 17

Reger, Jim, vice president, NG R Co------------------------------------------------ 20

Richardson, Doug, Council of Energy Resource Tribes ------------------------ 32

Rowland, Allen, president, Northe rn Cheyenne Tribal Council-------------- 32

Wooten, Ron, Consolidation Coal Co------------------------------------------------ 21

Prepared sta tem ent----------------------------------------------------------------- 21

(h i)

LEASES INVOLVING THE SECRE TARY OF THE INTERIOR AND THE NORTHERN CHEYENNE INDIAN

RESERVA TION

M A RCH 28 , 19 80

U.S. S enate,

S elect Com mit te e on I ndia n A ff air s,

Billings., Mont.

The committee met, pursuant to notice, at 10:30 a.m., in the city 

council chambers, Billings, Mont., Hon. John Melcher presiding.

Pre sen t: Senator Melcher.

Staff present: Max Richtman, staff director, Virginia Boylan, staff 

attorney, and Joe Meglen, special counsel.

Senator Melcher. The committee will come to order, please.

Good morning. This is a public hearing on S. 2126 for the Select 

Committee on Indian Affairs of the Senate.

This bill was to cancel certain coal leases and permits on the No rthern Cheyenne Reservation and to allow for payment of damages by 

the Secretary of the Inte rior to the coal companies th at hold those 

permits and leases. We hope to learn today what damages may be due 

to the coal companies involved.

A total of 56 percent of the Northern Cheyenne Reservation land 

area is affected by the permits and leases that were entered into between 1966 and 1973. In 1974, in response to a petition of the Northern 

Cheyenne Tribe, the Secretary of the Inte rior suspended all activity, 

and the situation has remained at an impasse since then. Tha t was 

6 years ago when the tribe petitioned. I think the Secretary was 

Rogers Morton.

The Secretary at that point said, “Nothing is going to happen,” and 

nothing has happened since that time. This bill which I have introduced is to do what the Secretary could have done. I believe, and probably should have done, 6 years ago. That is to cancel the coal leases and 

the permits on the basis that they were entered into in a manner that 

violated the Federal Government’s trust responsibility to the tribe.

To dramatize that, I believe the royalties provided in the leases are 

17 cents per ton. If that is an error, we will find out from the coal 

companies, but I don’t think there is any of us that can believe th at 

a royalty for the owner of the coal at 17 cents a ton is adequate. We 

can talk about what was legal and what was done in those particu lar 

years, but I just do not believe that that type of royalty is adequate at 

all, and I think there really is a very valid point—in my judgment at 

least there is a valid point—on whether the tr ust responsibility of the 

Secretary was properly carried out regarding tha t point.

(1)
2

Also, it seems app arent that there were leases in excess of the acres 

allowed under law, and we will listen to the testimony we receive 

today on tha t particular point.

Now, without legislation to cancel the leases, the tribe’s only alternative is to resort to the courts, and it would result in, of course, very 

lengthy and costly litigation, and while that litigation is going on, it 

would cloud the title to a major portion of the reservation for many, 

many years to come. .

So until something happens, all these matters are in limbo, and last 

December, I introduced S. 2126 in an effort to settle the m atter for all 

the parties involved.

At this point, I will place a copy of S. 2126 in the record.

[The bill follows:]
3

96th CONGRESS Q Q 1 Q £

1st Session

Relating to certain leases involving the Sec retary of the Interior and the Northern 

Cheyenne Indian Reservation.

IN THE SENATE OF THE UNITED STA TES

Dec em be r 13 (legislative day, November 29), 1979 

Mr. Mel ch er introduced the following bill; which was read twice and referred to 

the Select Committee on Indian Affairs

A BILL

Relating to certain leases involving the Secretary of the Interior 

and the Northern Cheyenne Indian Reservation.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 That the Congress finds that—

4 (1) certain mineral leases and prospecting permits

5 entered into between the Northern Cheyenne Tribal

6 Council and private parties in 1969, 1970, and 1971

7 presently encumber approximately 53 per centum of

8 the lands within the boundaries of the Northern Chey9 enne Indian Reservation;
4

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(2) due to the likelihood of permanent and largescale disruption of their tribal community which would 

result from development under such leases and permits, 

the Northern Cheyenne Indian Tribe has been and 

continues to oppose any development under these 

leases and prospecting permits;

(3) although such leases and permits were approved by representatives of the Secretary of the Int erior, it is a serious question as to whether such approval is consistent with the trust responsibility of the Secretary of the Interior to “act in the best interests” of 

Indian tribes and individuals;

(4) the present impasse which has existed with regard to such leases and permits, unless resolved, can 

only result in expensive and time-consuming litigation 

which does not hold out the likelihood of a satisfactory 

solution which would be fair to all parties; and

(5) cancellation of such leases and permits, and 

providing a fair remedy to any party or parties whose 

property interest, invested in good faith, would be adversely affected by such cancellation, appears to be the 

most direct and effective manner within which to resolve this impasse.

Sec. 2. Effective on the date of the enactment of this 

Act, all coal leases and permits issued pursuant to the provi-
o

1 sions of the Act of May 11, 1938 (25 U.S.C. 396a), and

2 involving the Northern Cheyenne Indian Reservation, are

3 canceled:

Name of companies Docum ent numbers Dates of entry

Peabody Coal Company (leasee)................. 14 -20-02 57 -897

14 -20-02 57 -899

14 -20-02 57 -900

14-20-02 57 -901

14 -20-02 57 -902

14 -20-02 57 -903

November 17, 1970 

November 17, 1970 

November 17, 1970 

November 17, 1970 

November 17, 1970 

November 17, 1970

Peabody Coal Company (permit)................ C -5 7-P -3 0

C-5 7- P- 31

C -5 7- P-3 2

August 18, 1969 

August 18, 1969 

August 18, 1969

Bruce L. Ennis (now assigned to Chev- C-5 7- P-4 2 May 21, 1971

ron Oil). C-5 7- P-4 5 June 14, 1971

Norsworthy and Reyer, Inc orp ora ted ........ C-5 7- P-4 6

C -5 7- P- 47

Jun e 14, 1971

June 14, 1971

Consolidation Coal Company...................... C -5 7- P- 43 May 21, 1971

Meadowlark Farm s, Incorporated (sub- C -5 7- P-4 0 May 21, 1971

sidiary of AMAX). C -5 7- P- 41

C -5 7- P-4 4

May 21, 1971

May 21, 1971

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Sec. 3. The Secretary of the Interior is authorized to 

receive, consider, and pay claims for damages arising out of 

the cancellation of leases and permits pursuant to the first 

section of this Act. Such claims shall be submitted in such 

manner, at such time, and contain such information as the 

Secretary of the Interior shall, by regulation, prescribe.

Sec. 4. (a) The Secretary of the Interior shall file an 

annual report with the Congress with respect to claims submitted pursuant to this Act. Such report shall include the 

name of each claimant, the nature of the claim, the amount, if 

any, paid pursuant to such claim, and information with respect to the disposition of such claim.

63 -275 0 - 8 0 - 2
6

1 (b) No claim shall be received by the Secretary of the

2 Interior pursuant to this Act unless such claim is submitted

3 to the Secretary of the Interior during the twelve-month pe4 riod following the date of the enactment of this Act.

5 Sec. 5. There are authorized to be appropriated such

6 sums as may be necessary to carry out the provisions of this

7 Act.
7

Se na tor Melcher. Ou r first witness th is mo rning is Da vid H arris on , 

actin g direc tor o f the Office of Tr us t Respo nsibility at the Bu rea u of 

In dian Affair s. David, we w ill be glad to hav e your t estimony at th is 

time, and it looks like the best witness seats are righ t there.

STATEMENT OF DAVID HARRISON, ACTING DIRECTOR, OFFICE

OF TRUST RESPONSIBILITY, BUREAU OF INDIAN AFFAIRS

Air. H arrison. Good mornin g.

Air. Ch air man and m embe rs of t he com mittee, I am pleased t o h ave 

this o pp or tunity to prese nt the views of t he De pa rtm en t of t he In te rior 

on S. 2126. a b ill relatin g to ce rta in leases inv olv ing the Se cre tar y of 

the In te rior and the No rth ern Cheyenne In di an Reservation.

S. 2126 w ould cancel certain coal leases an d perm its on the Northern 

Cheyenne In di an Reservat ion and wou ld pro vid e fo r the Se cre tar y to 

receive, consider, and pay all c laim s arising out of th e can cellation of 

the leases and p erm its.

In t he late 1960’s and early 1970’s, a Bu rea u of In di an Affairs official , ac tin g un de r delega ted au thor ity , appro ved thes e leases and pe rmits between several coal minin g com panies and the No rth ern Cheyenne In di an Tribe. Since t hat time, as we have outlin ed in our repo rt, 

cha nged circ umstan ces and cha nged desires of th e pa rti es involved 

hav e resu lted in a fail ure to ca rry ou t the te rm s of the leases. T he res ult 

has been a co nti nuing stalem ate with the spe cter of litigation overshadowin g e ach new attempt to resolve t he situa tion.

AVe do not believe t he cancellation and the F ed eral buy-out ap proa ch 

of S. 2126 offers a fa ir so lution to th is im passe. A s stat ed in o ur rep or t 

to the committee, we believe this measure is both unjus tifi ed and un ­

necessary an d would set a bad preced ent fo r fu tu re si mila r situa tio ns 

th at m ay arise.

AVe s till feel str on gly, Air. Ch air ma n, th at th is impasse can be resolved by good fa ith negotiation on the part of all th e pa rti es concerned and th at this appro ach is preferab le to the approa ch laid out 

by S. 2126, an d, consequently, we stro ng ly oppose S. 2126 and sugg est 

instea d th at a dd ition al efforts be m ade to wa rd the amicable se ttle me nt 

of the dispute.

Th is concludes my prepared sta tem ent, Air. Ch airma n. I will be 

pleased to answ er any questio ns you may have o r to discuss the gene ral 

outline s o f the a pp roach t hat we p ref er.

Se nator Melcher. Th an k you, David .

AVe will en ter into the reco rd, at this po int, the lette r from the 

De pa rtm en t of the In terio r, dated Alarch 27 of th is year, signed by 

Sid ney L. Mills, Deputy A ssistant Secre tary.

[The l etter follow s:]

U.S. Department of the I nterior,

Office of the Secretary, 

Washington, D.C., March 27,1980.

Hon. J ohn Melcher,

Chairman, Select Committee on Indian Affairs,

U.S. Senate, Washington, D.C.

Dear Mr. Chairman : This responds to your request for our views on S. 2126, 

a bill “Rela ting to certain leases involving the Secretary of the Interior and the 

Northern Cheyenne Indian Reservation.” We oppose the enactme nt of S. 2126.

S. 2126 would cancel all coal leases and permits issued under the Act of May 11,
8

1938 (25 U.S.C. 369a) and involving the Northern Cheyenne Indian Reservation, 

and would auth orize the Secretary of the Interio r to receive, consider, and pay 

claims for damages arising out of such cancellation.

In 1969, 1970, and 1971, a Bureau of Indian Affairs official, actin g under delegated auth ority, approved a number of mineral leases and prospecting permits 

entered into between the Northern Cheyenne Tribe and certain private parties 

and encumbering approximately 53 percent of the lands within the boundaries 

of the Northern Cheyenne Indian Reservation. All of the leases involved were 

entered into with the I’eabody Coal Company. The other companies involved 

were issued prospecting permits. During the early 1970’s, however, the tribe, 

upon reconsideration of the development contemplated by the leases and permits, concluded that the financial benefits of development were outweighed 

by the social effects of a “boom town" atmosphere and the environmental effects 

of extensive stripmining.

On Jun e 4, 1974, in response to a petition subm itted by the tribe, the Secretary decided that no lease for development of coal on the reservatio n would be 

approved if it exceeded an acreage limitation of 2,560 acres, set by regulation in 

25 C.F.R. 171.9, unless a specific, formal finding is made that such acreage is 

needed for electric generating or other ind ust rial facilities . The Secreta ry’s decision also stated that no action would be taken by the Department toward development of the coal without strict compliance with the National E nvironmental 

Policy Act (42 U.S.C. 4321 et seq.) or without the endorsement of the tribe.

Other factors, including inaction on the part of the companies involved, have 

also delayed the development of the Northern Cheyenne coal. There was uncertainty over the constitutionality of certain legislation extending the reservation of the mineral estate in the tribe in perpetuity, which was resolved in favo r 

of tribal ownership in Northern Cheyenne Tribe v. Northern Cheyenne Defendant

Class of Allottees, Heirs and Devisees, 425 U.S. 649 (1976). Fu rth er uncertainty, 

with respect to the standard s to which the companies would have to adhere in 

mining the coal, was resolved in 1977 with the enactment of the Surface Mining 

Control and Reclamation Act (30 U.S.C. 1701 et seq.).

We believe th at legislative cancellation of the leases and permits, along with 

the payment of damages to the companies out of Federal funds, as contemplated 

by S. 2126, is both unjustified and unnecessary. Such an approach would place 

the full burden of the resolution of the dispute on the Federal Government in a 

situation in which i t is clear th at other parties, by action or inaction, contributed 

to the development of the dispute. A tota l Federal buyout, as provided by S. 2126, 

is unjustified in such a situation. In addition, rather than providing a final 

solution to the dispute, we believe that S. 2126 may simply subject the United 

States to perhaps protracted litigation with respect to the leases by providing 

a basis, which we believe they do not now have, on which the companies involved 

may claim that the cancellation of the leases and perm its amounts to a taking 

of property for which just compensation is owed under the Constitution.

Moreover, the precedent S. 2126 would set would affect not only similar situations involving Indian lands, but also the Department’s other mineral leasing 

activities. A cloud could be cast over the stability of the Departm ent’s entire 

leasing program if the Congress abrogates th e leases and perm its in this dispute.

We also believe that it is inappropriate to authorize the Secretary of the 

Interior to receive, consider, and pay claims for damages, as is provided in section 3 of S. 2126. The Secretary is not equipped to provide an adeq uate forum for 

the consideration of claims including the award of money damages that would 

ordinarily be heard by a court of law, such as the Court of Claims. The bill provides no standard s for the consideratio n of the claims and leaves unresolved 

questions with respect to the waiver of sovereign immunity and the allocation 

of subject ma tte r jurisdiction. Nor does the bill contain any provision making 

payment of a claim by the Secretary an exclusive remedy and an extinguishment 

of all claims arising out of cancellation of the lease or p ermit involved.

In light of the foregoing, we strongly oppose the enactment of S. 2126. We suggest inste ad that furth er efforts be made toward the amicable settleme nt of 

the dispute.

The Office of Management and Budget has advised th at there is no objection 

to the presenta tion of this report from the standpoint of the Adm inistration’s 

program.

Sincerely,

Sidney L. Mill s, 

Deputy Ass ista nt Secretary.
9

Se na tor Melcher. Ar e you fa m ili ar with th is let ter ?

Mr. H arrison. I am, sir.

Se na tor Melcher. Fi rs t of all, how ma ny leases wer e let th at exceeded 2,560 acres?

Mr. H arrison. Th ere are six leases ou tst an ding , and I believe only 

one exceeds the acre age lim ita tio n.

Se na tor Melcher. For how ma ny acre s is th at ?

Mr. H arrison. Th at lease is fo r 13,000 acres.

Se na tor Melcher. So it exceeds it by what, five times?

Air. H arrison. By five tim es; th at is rig ht.

Se nator AIelcher. H ow many of the perm its exceed 2,560 acres?

Air. H arrison. Virtually all of the ou tst an ding pe nn its which 

con tain exclusive options to lease do exceed the acreage lim itation.

Se na tor Melciier. All of the m do?

Mr. H arrison. Yes.

Se na tor AIelcher. H ow ma ny of the m are there ?

Air. H arrison. There are, I think, eigh t outstandin g.

Se na tor AIelcher. W ha t is the acreag e invo lved ?

Air. H arrison. Those pe rm its cover acreages rang in g from 14,000 

to 28,000 acres.

Se na tor AIelcher. D id the Solicito r wr ite an opinion fo r the Secreta ry in 1974 advising the Se cre tar y th at this exceeded—t his let te r says 

it exceeds the regula tions. Does it no t exceed the law?

Air. H arrison. I t is our view7

 th at t he Secre tar y of the De pa rtm en t 

of the In te rior is c onstrain ed by law’ to ab ide by t he ir own reg ula tions.

Se na tor AIelcher. Does it no t exceed the law? Is it no t explicit 

in the law?

Mr. H arrison. The acre age lim ita tio n is a matter of reg ula tion.

Se na tor AIelcher. W ha t does the FLPA1A Act of 1976 con tain 

in acr eag e res triction?

Mr. H arrison. I am no t fa m ili ar wi th the acre age in the FDPAIA 

legisla tion .

Se na tor AIelcher. W ha t abo ut the Fe de ral leasing law th at w’as 

passed in 1976? Is th at no t exp licit?

Air. H arrison. I am not fa m ili ar wi th the ter ms of the Fe de ral 

leasing act. I am aw’are of the vas t excess of the acre age lim ita tio n 

th at is covered by the p erm its th at are outsta nd ing, and the So lic ito r’s 

office h as revi ewe d those. Tha t was revi ewe d by the So lic ito r’s office 

at several levels withi n the De pa rtm ent.

Se nator AIelcher. Well, ju st so we are not tryin g to ind ica te th at 

somehow’ the reg ula tio ns are to intercede and prote ct whe re the law’ 

does not cover, or t here is some vaguenes s in the law’ tha t is on ly pick ed 

up by the reg ula tio ns, can we agre e th at —w hatev er you wa nt to call 

the reg ulati on s in 25 CF R section 171.9—that these are ille gal leases 

in term s of acreag e ?

Air. H arrison. We can agre e th at these d ocumen ts violate the terms 

o f th at re gulation . Now, this is a question tha t has been in the m ind s of 

the Go vernme nt’s atto rney s throug ho ut th is dispute as to wh eth er or 

not the ap pr op riate remedy for th at vio lati on is an ou tri gh t 

cancellation.

Se na tor AIelcher. N o. We will get to th at a little bit later, David. 

I just w ond er w ha t we can agree on.

Air. H arrison. Yes, sir. We can agree t hat these pe rm its------
10

Sena tor Melcher. Are illeg al ?

Mr. H arrison [co ntinuin g]. Excee d the limitat ion .

Se nator Melcher. A re they illeg al ? Can we agree on th at in r egard 

to acres ?

Mr. Harrison. Mr. C hairm an, the Go vernm ent’s atto rneys have thus 

fa r declined to advise the Secre tary th at these docume nts are, in fact, 

illegal.

Se na tor Melcher. Even on acreage ? You wo n’t even concede that ?

Mr. H arrison. But I am prepared to ad mit and concede to th is committee t hat t he reg ula tions t hat the Secre tar y has imposed upon himself are bin din g as a matter of law. These perm its exceed t hat num ber.

Se na tor Melcher. I think th at is a back doo r way of say ing it. It 

satisfies me for the time being.

I t is well and good to say, “Well, we d on ’t th in k we n eed any leg islat ion because we can reach an amicable settleme nt by negotiatio n.” 

Th e reco rd does not show th at , David. Six yea rs have gone by, and 

there has been no negotiation that has been me aning ful , and there has 

been no s ettlement at all.

Mr. H arrison. Le t me respond to th at in two ways , Mr. Chairma n.

In the firs t place, this m atter has been vig orously pursu ed by the 

trib es with the invo lvemen t of the De pa rtm en t of t he I nt er io r and the 

companies involved fo r some 2 years now. There has been a g reat deal 

of activity tow ard coming to a resolution of the impasse th at is acceptable to all the parties, and we believe th at we can provide such a 

resolution.

I do no t inte nd to say, or leave the im pressio n, t h at legi slation is not 

necessary. I t is s imply th e appro ach to the resolution c ontem plated by 

S. 2126 which we find objectionable.

Senator Melcher. Yes; bu t you know as well as I do, th at w hen you 

prese nt testimony like this—do not prese nt an ame ndm ent, do no t 

have a bill of your own—t ha t you ’re leaving i t entirely , and you can 

d ri ft from one Congress to a nothe r, one 2-ye ar pe riod to anoth er.

Mr. Harrison. I am h opefu l. Mr. Ch air ma n, th at th e testimony this 

committee receives from the witnesses th at w ill ap pe ar here this m orning will pro vide you with a good deal more encourage ment as to the 

progress t ha t has been m ade than my state me nts alone.

Senator Melcher. We ll, we are very caref ul, and the De partm ent 

is very c are ful , D avi d, not to even s uggest it. As you well know, I well 

know, once you s ta rt into t his b usiness of sw appin g the coal involved 

in this lease on an In dian reserv ation fo r Fe de ral coal off th e res erv ation, y ou’re talk ing abou t huge value s. It is a pp aren t th at the Dep ar tmen t has chosen to spe ak ra th er vaguely abo ut neg otia tion s, witho ut 

seem ingly knowing an ything about negotia tio ns and witho ut say ing 

anything about n ego tiations, that it does involve r athe r he avy amounts 

of coal in terms of dol lars in value.

Mr. Harrison. Le t me assure the com mittee th at the De pa rtm ent 

is not conte mp lating any kin d of a swa p th at would involve even a 

remote paral lel , eit he r in acre age or in the ton nag e covered by these 

permits. I would like to add, Mr. Ch air man, I believe th e appro ach tha t 

we p refe r wou ld result in a resolu tion of the issue th at w ould cost the 

taxp ay ers of the Am eric an public fa r less dollars an d/ or coal than 

wou ld be inv olved in the appro ach contem pla ted by S. 2126.
11

Senator Melcher. Well, we will ask you what you think that value 

is in a moment, but first of all, I want to cover the point that concerns 

the amount of royalty available in the leases. Is 17 cents the figure?

Mr. Harrison. The first coal sale involved a royalty of 15 cents per 

ton for coal consumed on the reservation and 171/2 cents a ton for other 

coal. The subsequent leases, I believe, provided for a royalty of 171/2 

cents per ton for coal consumed on the reservation and 20 cents per ton 

for other coal. So your numbers are correct.

Senator Melcher. What was paid in the form of bonuses ?

Mr. H arrison. I will have to supply an exact figure for the record, 

but my understanding is that approximately $2.5 million has been paid 

over to and has been received by the Northern Cheyenne Tribe at this 

time. There are additional moneys in the form of annual rentals that 

are being held in escrow.

Senator Melcher. Do you know how much is there?

Mr. Harrison. Again, I will have to supply the exact figure, Mr. 

Chairman. I t is in the neighborhood of, I think, some $2 million.

Senator Melcher. Does it draw interest ?

Mr. Harrison. It does draw interest.

Senator Melcher. What interest rate does it draw ?

Mr. Harrison. I don’t know at what rate.

Senator Melcher. Treasury rate?

Mr. Harrison. No, sir. We are exceeding Treasury rates. I don’t 

know at what interest rate that money is presently invested. We are 

averaging about 15 percent on our investments now.

Senator Melcher. Now, is tha t held in escrow in a certain fund?

Mr. Harrison. Yes, sir.

Senator Melcher. Was the $2.5 million bonus distributed to the 

tribe ?

Mr. Harrison. Yes, sir.

Senator Melcher. In its entirety?

Mr. Harrison. That $2.5 million represents the sum—the approximate figure that has been paid over to the tribe in its entirety— 

tha t has been received by the tribe. Since the dispute arose, the tribe 

has declined to accept the rental and other payments tha t have been 

made.

Senator Melcher. But the purpose, the point of my question is, Is 

the amount tha t is held in escrow, based on rentals, the total unexpended amount tha t arose from these leases and permits ?

Mr. Harrison. I believe it is.

Senator Melcher. What we are really talking about, then, the outside damages, are what, $2.5 million plus the $2 million in escrow?

Mr. Harrison. Tha t depends, Mr. Chairman. The way the bill is 

written, there are no guidelines provided for determining those damages. I am quite confident tha t these companies, if thrown into the 

situation contemplated by S. 2126, would submit claims not only to 

recover their actual expenses to date, but for the value of that money 

for the last 10 years, and probably the lost profits on the hundreds 

of millions of tons of coal which have been taken from them. They 

would probably raise the question, if the Secretary didn’t agree with 

them, in ensuing litigation, tha t they have property rights in these 

leases and permits which have been taken and for which just compensation is due.
12

Senator Melcher. I am really entranced with this idea of a property right in something as vague as a coal permit or a coal lease. I 

won’t deal with it on the Indian reservation. I just deal with it on 

the Federal coal. It is my understanding tha t if I had a lease on 

Federal coal, regardless of how I acquired it, I would have to get an 

approved mining plan. I would have to do all sorts of things, and 

that may or may not ever happen. W hat is my right?

Mr. Harrison. Your leasehold interest?

Senator Melcher. What is my righ t in that instance, when the 

mining plan is turned down?

Mr. Harrison. Your right is to keep coming until you get one, but 

you do have a right.

Senator Melcher. Under our law, there are some places that have 

been leased tha t will never be mined, and what is my right where 

the law prohibits the mining in that instance ?

Mr. Harrison. I am not sure I fully understand that question.

Senator Melcher. Well, we are talking about coal leases for Federal coal that go back into the late 1960’s or 1970's, maybe even some 

older than that. Since that time, we passed the Federal Strip Mining 

Act tha t outlines areas that will never be mined.

Mr. Harrison. That is right.

Senator Melcher. So, what is my right ?

Mr. H arrison. Your right is probably to receive compensation for 

something that was taken from you. I might add tha t the President 

has directed the Secretary to examine all of those Federal leases and 

to take whatever steps are necessary to deal with those th at are not 

producing and are not environmentally acceptable, including the submission of legislation to authorize payment of compensation for those.

Senator Melcher. Now, wait a minute. When the Secretary gets 

around to introducing tha t legislation, I would like to be around. I 

hope I can survive in Congress to see what type of legislation tha t is.

Mr. Harrison. And let me answer, too, Mr. Chairman, tha t the 

average size of a Federal coal lease is in the neighborhood of—at least 

as of a couple of years ago—in the vicinity of 1,400 acres as opposed 

to the tens of thousands of acres involved here.

Senator Melcher. Yes, that is right.

Let’s review two things. It is highly unlikely that any court would 

find that a property right existed, however vague it is, and I think 

these property rights that are claimed on coal leases and Federal coal 

permits are really vague. But however vague it is, or however firm it 

is, it is hardly likely that anybody, the Secretary, the Secretary solicitors, or any Federal court would feel that any property right flowed 

from an illegal lease or an illegal permit. I s that not true?

Mr. Harrison. Some courts have come down precisely that way involving both Federal and Indian leases. Some courts have looked at 

those very same questions, Mr. Chairman, and declined to rule that no 

rights have vested. Some courts have undertaken some rather imaginative arithmetic to try to resolve themselves the kinds of disputes that 

we have here, and which we think are best worked out by the parties 

themselves.

Senator Melcher. Since 1974, you have had the opportunity to work 

tha t out between the parties themselves. You said, “Well, during the 

past 2 years, we got busy on it.” Isn’t it apparent that from 1974, whatever damages might be claimed will have to be damages against the 

Secretary and the Federal Government?
13

Mr. Harrison. I f the Congress cancels these leases, that is true. If 

the Secretary attempts to cancel these leases, I am sure the companies 

would challenge that, and then we would have to wait for the results of 

tha t litigation to determine where the claims for damages would lie.

Senator Melcher. OK. Let’s conclude on this point, then. The sum 

and substance of your testimony is that whatever is done is probably 

going to need legislation; is that right ?

Mr. Harrison. Tha t is correct, Mr. Chairman. Let me add tha t the 

Department greatly appreciates the interest tha t this committee has 

shown in addressing this longstanding dispute, and we are anxious to 

work with the committee in a way to get us over this hurdle and in 

a way tha t we believe involves all of the parties and involves a little 

give and take on the part of all of the parties.

Senator Melcher. Thank you very much, David.

Mr. Harrison. Thank you, Mr. Chairman.

Senator Melcher. Now, we will have the coal companies’ representatives. Would you all gather here, please.

Please start here and identify the panel.

Mr. Wooten. Mr. Chairman, my name is Ron Wooten, and I am 

with Consolidation Coal Co.

Mr. H aughey. I am Ji m Haughey, an attorney in Billings, Mont., 

representing Peabody Coal Co.

Mr. Ferrand. Mr. Chairman, my name is Chris Ferrand, director 

of corporate planning with Peabody Coal Co.

Mr. P ortmann. Mr. Chairman, my name is F rank Portmann, and 

I am director of Federal affairs for AMAX Coal Co.

Mr. Dahlstrom. Air. Chairman, my name is Clint Dahlstrom, and 

I am the vice president and general manager of Chevron Resources 

Co.

Senator Melcher. Is Jim Reger here yet ?

Air. Reger. Yes, sir.

Senator Melcher. Jim, do you want to be part of this group?

Mr. Reger. Yes, thank you, sir.

Senator Melcher. We have you on the list.

Mr. Reger. OK.

Senator Melcher. Now, the testimony we have is the testimony 

you have prepared, Air. Haughey ?

Air. Haughey. Yes, Air. Chairman.

Senator Melcher. Are you speaking for the group ?

Air. Haughey. No. I am speaking, Air. Chairman, for Peabody 

Coal Co., and it may well be tha t some, and perhaps all of the other 

companies may make brief statements, but I plan to make a principal—present the principal testimony on behalf of Peabody.

Senator Melcher. OK. Would you proceed.

STA TEM ENT OF JIM HAUGHEY , ATTORNEY, ACCOMPANIED BY

CHRIS FERRAND, DIRECTOR OF CORPORATE PLANNIN G, PE ABODY COAL CO., BILLINGS, MONT.

Mr. Haughey. Air. Chairman, Peabody is the holder of six coal 

leases and three prospecting permits within the boundaries of the 

reservation. S. 2126, the bill which is the subject of these hearings, 

would cancel these and all other coal leases on the reservation and

63-2 75 0 - 8 0 - 3
14

wou ld pro vide for pay ment of damages to the permitte es and lessees 

fo r such cancellation.

Over a period of nearly 14 years. Peabod y has inves ted litera lly m illions of dollars in the p urchase, mainte nance, and e xplor ati on o f these 

properties , and acc ord ingly, Pea body has a grea t deal at stak e in the 

outcome of the legisla tion which you have proposed.

We wish to convey, Mr. Ch airma n, ou r gr at itud e to you fo r your 

efforts to find a solu tion to this p roblem of d eve lopment of the N or th ­

ern C heyenne coal. Peabody shares a genu ine i nte rest in resolving th is 

co nti nuing impasse, th at the impasse between the inter est of developing valua ble coal resources on the one hand, and the desire of the t rib e 

on the other to prevent minin g activ itie s whi ch the tribe conceives 

would be incons iste nt wi th their cultu re an d th ei r tra ditio ns.

I w ant to emph asize that while the tr ib e c ons ulte d us be fore re questing this legisla tion , Peabody had no hand in th e pr ep aration of the 

request, nor did wre ta ke any steps to in iti ate the effort. Whil e we con ­

sider the coal prop ert ies to be extremely v alu able from the stand po int 

of quality, qu an tity, an d resou rce configuration , we have recognized 

for some tim e th at the tri be is gen uinely reluctan t to hav e the leases 

developed.

W ha t I wa nt to po int out, Mr. Ch air ma n, is th at these leases, these 

per mits under some of which the Peabody leases were selec ted ; were 

purcha sed at the invit ation of the tri be an d/o r the Fe de ral Go vernment in good fa ith at ope n comp etitive bidding at public sale f or terms 

esta blished by the Dep artm en t of the In te ri or; were executed by the 

tri ba l au th or itie s; and were appro ved by the S ecret ary of the In terio r. 

Peabod y firm ly believes th at its pe rm its and leases are valid an d sub ­

sisting, and th at if the y are now una cce pta ble to the tribe, the faul t, 

if there is any , is t hat of the Dep artm en t of the In te rior a cti ng on beha lf of the No rth ern Cheyenne Tr ibe fo r the Un ite d Sta tes.

Now, with respec t to the perm its, my conception is, as I recall the 

law—and I hav e no t recentl y reviewe d it, I mu st say—t hat t he acr eage lim ita tio n of 2,560 acres, at the tim e these pe rm its were sold, was 

not app licabl e to the permit. It was applicable to leases selected un de r 

the perm its af te r explo rat ion was d one on the wider are a covered b y 

the per mits, bu t it its elf was subje ct to modification and exp ansion if 

the company, vy ing for the leases, were to show a need fo r the larg er 

acreage for certain sta ted pu rposes. M y und ersta nd ing is th at Pe abo dy 

did make th at showin g. I d on ’t know to wha t e xte nt it was in wr iting.

At any rat e, we conceive th at th e pe rm its were valid and th at the 

leases th at are h eld by Peabody are v ali d. We conceive th at Pea body 

has v alid pr op erty rig hts which are enforceable by a cou rt which has 

jur isd iction over the pa rti es and the subje ct matter , and th at if the 

case gets to the c ourts, those rig ht s will be uph eld. An d so we do not 

recognize, no r admi t, no r concede, th at these are not pr op erty rig hts 

and th at the y are no t enforceable in a prop er cou rt. I suppose th at 

this isn ’t the place, tho ugh, to get into a legal arg um ent about the 

va lid ity , b ut I think it should not be assumed th at these are not valid 

leases a nd p erm its. On J un e 4,1974, the Secre tar y o f the Inte rior issued a decision on the 

petition of the tri be which sought can cellation of these pe rm its and 

leases fo r the fa ilu re—alleged failu re—of th e D ep artm ent to pro perly 

exercise its tr ust res ponsi bility fo r the tribe . The decision did not rule 

upo n the va lid ity of the leases and pe rm its b ut, instea d, left them in
15

limbo in an un certa in sta tus which clouds the title to the triba l lan ds 

an d yet prev ents th e develo pment of th e trib e’s coal.

Peabody, at one tim e, ha d t he firm inten tio n to develop th ese pr op erties, an d it en tered into a contr act with Cities Service Co. and No rth ern 

Natural G as to utilize th e coal in a p roposed gasificatio n fac ility. Su bstan tia l amounts of money were exchanged. D rilli ng was und ertaken in 

the fu rth eran ce of th at effort, bu t by the action of the Secre tary, a 

cloud was plac ed on the valid ity of the leases an d th e coal supp ly agree ­

ment consequ ently ha d to be ter mi nated . Peabody recognizes th at in 

view of the opposition of the tri be and the decision of the Secre tar y, 

it p res ently is not p ossib le to deve lop thes e p rop erties , b ut we are hop eful th at since S. 2126 has been introd uced th at an equ itable solution 

to this impasse can be f ound; one th at is accep table to the tri be a nd to 

the companies a nd the Fe de ral G overnm ent.

Our aim, which, I believe, is shared b y all parties, is to avoid costly 

and tim e-cons uming litiga tio n. We believe th at the like lihood of such 

litigation wou ld be significantly dim inishe d, if n ot w holly eliminated 

by an amendmen t to S. 2126 which would perm it the Se cre tar y to pay 

can cellation damage s in the form of al ternative coal righ ts o r in right s 

to b id in fu ture com petitive coal lease sales. Und er such a n amendm ent, 

the alternative coal rig hts , or in lieu of that, certa in bi dd ing rig hts, 

would be conveyed in accordance wi th signed agreements with th e Secretary of the In terio r.

I wa nt to assure you th at we’re not talk in g about an exchange of 

coal leases pe r se, a quid pro quo, a ton-f or- ton exch ange , in any w ay. 

We do not seek alternative coal righ ts measured by the estimated 

reserves held under the leases or pe rm its on the reserv ation. Ra ther, 

we believe th at we can reach an equ itable agreem ent with the Secreta ry in whi ch leases of a specified qu an tity of coal or am ount of coal 

would l>e acce pted in full paym ent fo r any claims ari sin g ou t of t he 

can cellation of our leases and per mits. An d thes e reserves th at we 

wou ld seek in such an agreem ent wou ld not of them selves constitu te 

new minin g units, bu t would really constitu te ad junc t reserves to 

existing Peabody prop ert ies outside the reservatio n.

We have ha d preli minary discussio ns wi th the Dep artm en t of the 

In terior , and wre are convinced th at a satis factory agreem ent, such 

as we outlin ed, can be reached. In fac t, in ou r discu ssions, Dep ar tment personnel have ind ica ted th at the y favo r such an appro ach, 

and I believe t he discussion th is m orn ing w ith M r. Harris on indicates 

th at appro ach is one th at is viable.

By con firm ing in statute the efficacy of the agr eem ents free ly 

ent ere d int o by the Secre tar y and the affected companies, the leg islatio n would avo id the obvious constituti onal problem of un ila ter al 

con gres sion al can cellation of leases an d permits. Fur th er , it would 

elimi nate the un ce rta inty in the fu tu re leas ing, not only of In dian 

coal, bu t of fed erall y owned coal which is cre ate d by the pro spe ct of 

congres sional action to extin guish p ro pe rty r ig ht s p urc has ed at public 

com pet itive bidd ing pe rm it sales.

There for e, Mr. Ch air man, we u rge y ou r con sideration of an ame ndment. which wou ld pe rm it the Se cre tar y to en ter into agreem ents 

un de r whi ch coal leases or coal rig ht s could be leased as compen-
16

sation to the existing lease and permit holders. These rights or leases, 

once selected, would be subjected to normal land use planning and 

environmental review under the Inte rior Department’s Federal coal 

management program. If all or part of the agreed upon properties 

were found to be unsuitable for mining or for leasing, bidding rights 

could be substituted in accordance with a formula specified in the 

agreement. These bidding rights would be usable in future competitive coal lease sales.

We would be happy to work with you and your staff in developing 

an appropriate agreement. We think tha t perhaps the Department 

is better equipped to assist in the draftin g of appropriate language, 

but if the committee should please, we will be happy to furnish suggested amendatory language before the close of the hearing.

Mr. Chairman, what we are discussing is not a major alteration of 

S. 2126 as introduced. We are suggesting th at the language of section 

3 of the bill be broadened to permit the Secretary to pay claims in 

coal rights in accordance with agreements between the parties. It 

might be appropriate to have such agreements reviewed by Congress, 

and by this select committee specifically, before they should become 

effective so as to give control in Congress and your committee over 

the magnitude of any rights which might be thought to be subject 

to the exchange.

Now, while at first blush it might seem that the leasing of federally 

owned coal to compensate for cancellation of Indian coal leases is 

inequitable to the Federal Government, it should be remembered that 

these leases and permits were issued by the tribe with approval of, 

and under procedures established, by the Federal Government. Lessees 

and permittess assumed th at the Federal Government, acting as tru stee for the tribe, was obligated to see that the rights once granted were 

not violated, and yet it is now the Federal Government itself which 

proposes to extinguish those very rights.

In his decision dated June 4, 1974, the Secretary stated in the most 

direct terms tha t Peabody and the other affected companies will not 

be permitted to develop their leases and permits without the agreement of the tribe. We believe that the departmental decision was an 

administrative taking, an act which, if left uncompensated, for the 

most extent, would leave the permittees and lessees no alternative but 

to seek redress through litigation. However, the legislation tha t you 

have proposed is an admirable attempt to find an equitable solution. 

Now, with the cooperation of the tribe—with the cooperation of the 

Department and having consulted with the tribe, we seek a refinement 

which is equitable to all parties and which would remove the prospect 

of litigation.

I want to restate our gratitude for your efforts, Mr. Chairman, and 

say that we stand ready to assist in any way we can. Mr. Ferr and and 

I will attempt to answer any questions you may have. Thank you, Mr. 

Chairman.

Senator Melcher. Thank you, Jim.

Who else will want to comment here? You are Mr. Portmann?

Mr. Portmann. Yes, sir.

Senator Melcher. From AMAX ?
17

STATEMENT OF A. FRANK PORTMANN, DIRECTOR, FEDERAL 

AFFAIRS, AMAX COAL CO.

Mr. P ortmann. Yes, sir. I would like to submit a copy of our testimony for the record and make a couple of very brief statements as 

far as we are particularly concerned.

We are the holder of three permits within the boundaries of the 

Northern Cheyenne Reservation at the present time. The bill, S. 2126, 

would, of course—as everyone else here is aware—dramatically affect 

us, and we are legitimately concerned about its provisions. We also 

are genuinely concerned about the Northern Cheyenne’s desire to remove any clouds to titles in their lands.

AMAX Coal Co. permits in the Cheyenne area represent the greatest contiguous tonnage reserve th at is now controlled by our company, 

and we and other lease and permit holders relied in good faith on the 

premise tha t the Federal Government acted as trustee for the tribe 

and tha t they would uphold the rights basically as conveyed.

Our company has been involved with the Northern Cheyenne, the 

coal reserves in question, and the Federal Government since before 

1969. We believe tha t all of our efforts concerning these coal reserves 

over the last 11 years have been aboveboard and in good faith.

In 1971, we purchased preferential right prospecting permits within 

the reservation area, and although there were questions about the m arketability of the coal at that time and the value of most of the Federal 

coal nationally was very minimum at tha t time, tha t AMAX decided 

to proceed in hopes of developing the property. Since then, it has been 

determined th at the value of coal in the area in question is some of the 

highest in the entire region, and it is our understanding tha t significant mining operations are planned near the reservation, including 

rail transp ortation, which makes the properties which we are discussing even more attractive.

Since the time when the agreement was obtained, the situation has 

obviously changed dramatically, and now we are caught up in the 

whole dispute, as is everyone here. We believe that, as was mentioned 

by Peabody Coal Co. that the introduction of this bill provides all p arties with a vehicle to resolve the situation, and I will say that we subscribe to the points brought out in Jim ’s testimony on what would be 

needed to come to an equitable solution to which all parties would 

agree.

We have been in the business for a long time. I have seen many 

such situations come and go. This is one of the first times that I have 

seen most of the parties in question in a situation like this, where they 

agree basically on what is an all-around fair and just remedy, and I 

commend all of the parties to that, and I hope that we will be able to 

amend the bill so it will reflect those thoughts.

Senator Melcher. Thank you, Mr. Portmann. Your prepared statement will be made a part of the record at this point.

[The prepared statement follows:]

Prepared Stateme nt of A. F rank P or tm an n, Director, F ederal Aff air s, 

AM AX Coal Co.

Mr. Chairman, my name is A. Frank Portmann. I am Director of Federal 

Affairs for AMAX Coal Company.
18

AMAX Coal Company is presently the hold er of three perm its which are with ­

in the boundaries of the Nort hern Cheyenne Ind ian Reser vation . All of these 

perm its/leases are directly affected by S. 2126, which seeks to void all 2V MAX 

(an d othe r partie s’) coal rights on th e Rese rvati on and provide payment of d amages to holders of th e affected permits an d leases.

Mr. Chairman, S. 2126 could have a significant effect upon AMAX Coal, and 

we are legitim ately concerned about its provisions. We are also genuinely concerned about the Nort hern Cheyenne’s desire to remove any clouds on the titl e 

to the ir lands. As evidence of our continuing inte rest, we have for more tha n a 

year participated in preli minary discussions with the Tribe, oth er companies 

and the Dep artm ent of Inter ior in an effort to find a mutually agreeable and fair 

solution to the situation .

AMAX Coal’s leases in the Cheyenne are a repr esen t the gre atest contiguous 

tonnage reserve now controlled by o ur Company. These leases and perm its were 

negotia ted by the fede ral governm ent on beha lf of the Tribe and were agreed to 

by the auth orized Tribal representatives. We and other lease and perm it holders 

relied in good f aith on the premise th at the federal governm ent acted as trus tee 

for the Tribe and would uphold our righ ts as conveyed. To date all partie s have 

avoided litig atio n of this issue—thi s avenue would be ex treme ly costly and timeconsuming to all concerned.

Mr. Chairman, AMAX Coal Company has been involved with the Nor thern 

Cheyenne Tribe, the coal reserves in questio n and the federal government since 

before 1969. We believe th at a ll of our efforts concerni ng these coal reserves over 

the last 11 ye ars have been above-hoard and in good faith.

In 1971 AMAX purchased pre fere ntia l rig ht prospecting perm its for some 

72,000 acres within the Nort hern Cheyenne Ind ian Reser vation . Although there 

were questions about the marketabi lity of the coal in the Montana area , and the 

value for coal on most fede ral lands was minimal, AMAX decided to proceed 

in hopes of developing this property .

Since th at time, it has been determ ined th at the value of the coal in the are a 

in question is some of the highest in the region. It is our unde rstanding th at 

significant mining operation s are planne d near the Rese rvation, including ra ilroad transp orta tion , which makes the prop ertie s which we are discussing even 

more attr active.

Since t he time when agree ment was obtai ned from the Dep artm ent of Inter ior 

(inclu ding the BLM and BIA ) and the Nor ther n Cheyenne (1 96 9) , the situ atio n 

has changed to a gre at extent, and AMAX is now caug ht in a dispu te between 

the Departm ent of Inter ior and the Nor thern Cheyenne Ind ian Tribe ; the res ult 

of which inhibits our fu rth er developing prop ertie s in which we invested almost 

a decade ago. AMAX has done nothing to exa cerbate the situation . We have at ­

tempted to work out a solution with all parties.

AMAX Coal believes the intro duction of S. 2126 now provides all partie s with 

a vehicle to resolve the situ atio n once and for all. However, the proposed legisl ation does not appear to provide for an equi table solution in its pres ent form. 

We believe an amendment to S. 2126, which would perm it the Secr etary to pay 

damages for the extin guish ment of the leases and perm its in alt ern ative coal 

rights or righ ts to bid in upcoming compe titive lease sales, would provide for an 

equitable resolve.

In light of previous discussions with t he Dep artm ent of I nte rior , we are certain 

an agreem ent could be reached which would conta in the following pro vision s:

In ret urn for AMAX’s willingness to relea se all claims to prop erty on the 

Cheyenne Reservation and to ref rain from any litig atio n aga inst the governm ent 

in regard to thi s matter , th at the Secretary of Inter ior and the companies will 

ente r into an agreement which will result in the non-competitive lease of fede ral 

coal to AMAX. (We wa nt to emphasize th at we do not seek an out righ t exchange 

or a lease which corresponds in tonnage to our estim ated reserve on the 

Reserva tion.)

In the event th at the Secre tary and AMAX are unable to agree upon a specific 

are a of interest, AMAX and the othe r par ties with inte res t on the Reser vation 

will be awa rded bidding righ ts in an amo unt to be determ ined by the Secretary 

for use in subsequ ent fede ral coal lease sales.

The Dep artm ent and AMAX have agreed, in principle, to a proposed lease 

area which is contiguou s to an on-going opera tion in the State of Wyoming which 

will he developed in accordance with the app rop riate regulatio ns of the Dep artment of I nte rio r. The Secretary has insisted a nd the companies have agreed th at
19

any lease area agreed to will not in and of itse lf crea te a new mining operation. 

The area selected by AMAX will provide the most economic and environmentally 

sound development of the reserve in the shortest time frames. In fact, there is 

good reason to believe tha t this coal cannot and will not be developed by a party 

other than AMAX.

The development of the proposed lease are a will he totally consistent with and 

issued under the provisions of the Federal Coal Management Prog ram in rega rd 

to land use planning, environmental considera tions and subject to all other permitting a nd operational requirements imposed by BLM, USGS, OSM, etc.

We believe the proposal outlined above is the most workable and reasonable 

solution to the overall problem. A successful implementation of this program 

will accommodate the wishes of the Tribe by providing them with unimpaired 

title to the reserves on the Reservation, compensate the companies in a 

manner which is acceptable to them, resolve any and all problems for the Department of Interior and par ticu larly the Bureau of Indian Affairs, and be 

accomplished without the fede ral government being requ ired to make substan ­

tia l cash payments to the parties.

On behalf of AMAX Coal Company, I again tha nk you for taking an intere st 

in this situation and providing us w ith a vehicle to remedy same.

Senator Melcher. Now, Mr. Dahlstrom ?

Mr. Dahlstrom. Yes. I have a brief statement tha t I would like 

to read.

Senator Melcher. Fine. Please proceed.

STATEM ENT OF CLINT DAHLSTROM, VICE PRES IDEN T AND 

GEN ERA L MANAGER, CHEVRON RESOURCES CO.

Mr. Dahlstrom. Mr. Chairman, my name is Clint Dahlstrom. I am 

vice president and general manager of Chevron Resources Co.

Our company is charged with exploration for and production of 

nonhydrocarbon minerals for Standard Oil Co. of California, both 

domestically and overseas. That responsibility includes management 

of mineral properties owned by Chevron USA, Inc., which was f ormerly Chevron Oil Co., which presently holds mineral prospecting 

permit C-57-P-42 covering 27,750 acres on the Northern Cheyenne 

India n Reservation. That permit was acquired in November 1971 from 

Bruce Ennis, who bought the permit in competitive bidding at Northern Cheyenne coal sale No. 3 on April 22,1971.

Incidentally, S. 2126 as introduced indicates that Chevron USA 

also owns mineral prospecting p ermit C-57-P-46. This is not correct. 

I believe this latte r permit may still be held bv Bruce Ennis.

This prospecting permit was acquired by Chevron as part of its 

effort to enter the coal mining business. While Chevron is principally 

an oil and gas company, we believe our knowledge and expertise in 

tha t area can be transferred and applied to the production of other 

energy resources such as coal. The permit on the Northern Cheyenne 

Indian Reservation was attractive to us because large reserves of low 

sulfur coal on the permit area had been demonstrated by the drilling 

conducted by Mr. Ennis’ principals, Norsworthy and Reger, Inc., in 

the summer of 1971.

It was our intention to continue evaluation of the property and pro ­

ceed with early development of a surface mine. This intention has not 

materialized because of actions taken by the Northern Cheyenne Nation in their efforts to cancel all mining permits and leases on their 

lands. We have been unable to get permits to do furth er exploratory 

work. We applied both fo r extension of the prospecting permit and for
20

issuance of a mining lease. No action has been taken on either of these 

applications. We are still ready, willing, and able to proceed with 

furth er exploration and development of coal reserves within the permit area if we could obtain the concurrence of the Northern Cheyenne 

Nation.

However, Chevron does agree that some legislative solution to the 

present impasse is necessary. That solution should consider the legitimate interests of the Northern Cheyenne Nation in preserving their 

reservation lands and their way of life. However, it should also consider the interests of the operators who have invested capital and effort, 

in the coal permits and leases.

The legislative solution we are discussing today, S. 2126, would 

cancel our permit as well as the permits and leases of others and would 

compensate us through claims filed with the Secretary of Interior. We 

cannot support enactment of S. 2126 as introduced. Cancellation of 

our mineral prospecting permit with an indefinite and possibly inadequate formula for compensation is unacceptable to us.

We believe that a better solution to this problem would be for the 

operators to negotiate with the Secretary of Interior for the noncompetitive acquisition of coal leases on Federal lands in settlement of 

their claims for compensation and to have such negotiated settlements 

included as a part of the legislation. We are willing to work with the 

Department of Interior and this committee or its staff to achieve these 

results.

Tha t concludes my prepared statement. However, I would be happy 

to answer any questions which you may have about our position on 

S. 2126.

Senator Melcher. Jim, did you want to make any comments?

STATEMENT OF JIM REGER, VICE PRESIDENT, NRG CO.

Mr. Reger. I ’m Jim Reger, vice president of NRG Co., successor to 

Norsworthy & Reger, Inc., and at the present time we hold three permits on the Northern Cheyenne Reservation.

I don’t, have a prepared statement, but I might say that our company basically supports the position of Peabody, AMAX, Consolidated, Chevron, and all the other permit, holders. We have always tried 

to cooperate with the Northern Cheyenne and their attorneys. We have 

always been willing, and have made several trips to Lame Deer and 

Washington, D.C. In fact, last week my partner called upon the Department back in Washington and gave them his assurance th at we 

would cooperate in any wav to resolve this impasse.

We know the Northern Cheyennes don’t want us to mine coal down 

there. We found tha t out years ago, and we don’t, want a big fight or 

any more litigation than there has been. We are willing to walk away. 

Afte r that problem, our company confined our coal operations to Wyoming where, we knew what we were doing, and we have properties 

down there,

All we care about is some equitable type arrangement, some solution 

to this. The Indians need that so they can get on down the road with 

their plans. We are willing to do anything to cooperate with the Department on any legislation that is proposed.
21

Senator Melcher. Does anyone else have anything?

Mr. Wooten. Mr. Chairman.

Senator Melcher. Yes.

STA TEM ENT OF RON WOOT EN, CON SOLI DATION COAL CO.

Mr. Wooten. Ron "Wooten, Consolidation Coal Co.

I also have a statement tha t I would like to submit for the record, 

but for the sake of brevity, I will just make a couple of remarks.

First, we endorse the testimony of Peabody and the other companies, 

especially concerning the vehicle for correcting the problem that we 

see existing. In our discussions with the companies and the Dep artment, terms established by the Department, in addition, would require 

tha t payment would be made in coal rights adjacent to existing operations or operations for which a mine plan has been filed so tha t any 

additional payments would not be enough to establish an LMU in and 

of itself.

That’s all I have.

Senator Melciier. Thank you, Mr. Wooten. Your prepared statement will be made part of the record at this point.

[The prepared statement follows:]

P repared Stateme nt of Cons olid ation Coal Co.

Consolidation Coal Company (Cons ol) app recia tes the oppo rtuni ty to submit a 

stateme nt for the hear ing record on S. 2126, a bill rela ting to cer tain leases involving the Secr etary of th e Int erior and the Nor thern Cheyenne Ind ian Rese rvation. Consol endorses the testimony of Peabody Coal Company and supp orts the 

Amendment prese nted by Peabody.

Consol is the holder of one prospecting permit on the Northern Cheyenne 

Reser vation . Such perm it was acquir ed af te r good fai th negotiations with the 

Dep artm ent of the Int eri or acting as age nt for the Tribe. This permit would be 

affected by enaction of S. 2126.

The problems associated with produ ction of coal on the Nort hern Cheyenne 

Reservatio n have lieen known to Consol for some time. It should be pointed out 

th at Consol und erstands the concerns of the Nor thern Cheyenne. Indeed, Consol 

and the other affected companies have been supportive of efforts to remove the 

exis ting title clouds, so as to provide clea r tit le to the Tribe. To the ext ent th at 

S. 2126 would do tha t. Consol acknowledge s the effort, and is supportive of the 

concept. However, S. 2126 as introd uced is not a fa ir proposal as fa r as Consol 

is concerned. Ena ctm ent of S. 2126 would undou btedly place Consol and the other 

companies involved in a position where litig atio n with the Dep artm ent of the 

Inter ior over damages would be the resu lt. Consol does not wish to ent er into 

such litig atio n but litigat ion is seen as the end result to enactmen t of S. 2126 as 

introduced.

All of the companies involved would pre fer to elim inat e the possibility of lit igation by requesting the Committee’s supp ort for the Amendment offered by 

Peabody Coal Company. Specifically, the Amendm ent provides th at damage s 

could be made in kind, meaning other coal rights. In meetings with the Depar tment of the Inter ior it was determined th at methodology employed for paym ent 

must lie such th at the inte grit y of the Dep artm ent’s lea sing progra m would not be 

jeopard ized. Under the term s estab lishe d by the Depa rtment, othe r coal righ ts 

could lie offered in lieu of cash paym ents for damages . It should be pointed out 

th at the De par tme nt’s term s do not contempl ate an acre for acre or ton for ton 

payment. Consol has subm itted a proposal th at would provide it with payment 

of approxim ately 20 perce nt of what has been asce rtained by extens ive exploration to lie the curre nt righ ts on the Northern Cheyenne Reserv ation.

Addition ally, term s estab lishe d by the Dep artm ent would requ ire th at payment would be in coal rights adjacent to exis ting operation s or operation s for 

which a mine plan has been filed. The paym ents could not complete in and of 

themselves a “Logical Mining Uni t’’ (LM U) ; however, these paym ents when

63-2 75 0 — 8 0 — 4
22

added to existing rights could, and in many instances will, establish an LMU. The 

term s also requ ire that the payments be in coal rights, so situate d, th at it would 

be highly unlikely that anyone else would seek such rights. Consol’s proposal to 

the Department concerns an area which it expects to lease in a 1984 lease sale. 

Afte r all land use planning is completed, Consol probably could acquire the coal 

righ ts during calendar y ear 1983. Consol presen tly owns all the surface overlying 

the coal which it hopes to acquire.

Conoco Coal Development Corporation (CCDC), a sis ter company of Consol, is 

contemplating the estab lishm ent of a methane and methanol plant, utiliz ing the 

coal reserves, from the established LMU, made available from existing coal 

reserves and reserves made available by enactm ent of S. 2126 as amended, by Peabody. It is important that CCDC know as quickly as possible as to the availability 

of these reserves. CCDC will initiate a study as to the feasibility of such installation during calendar year 1980. Consol considers the coal and the area 

covered by its proposal to be the best available to CCDC from Consol reserves. 

Therefore, it is important th at Consol know for ce rtain th at these re serves will be 

available. Enactment of S. 2126, as amended by Peabody would provide the 

needed impetus for CCDC to begin its feasibility study for estab lishm ent of such 

plant in Montana.

It is the position of Consol th at it would supp ort S. 2126 as amended pursuant 

to the Peabody proposal. Consol cannot, however, supp ort S. 2126 as introduced.

Senator Melcher. J im, your recollection of the law is that the permits are not subject to acreage limitation but when they lead to leases, 

they are subject to acreage limitation ?

Mr. Haughey. Yes, at least at the time these permits were sold.

Senator Melcher. Now, you mentioned the bill, as it is, might provide a constitutional problem. I think you said it would be a unilateral 

act of Congress, meaning that the Congress would cancel-----

Mr. Haughey. Right.

Senator Melcher [continuing]. And then negotiate out your rights 

in dollars after that. You would view that as posing a constitutional 

problem ?

Mr. Haughey. Yes. I think at least the determination that the leases 

were canceled. I doubt tha t the Congress has the power to say that. A 

court would have, perhaps, i f they are, in fact, invalid. A court could 

determine th at, but I don’t think tha t Congress has the power to do 

tha t if the parties who hold these property rights are unwilling to 

accept tha t cancellation.

Senator Melcher. Does the constitutional part hinge on whether 

or not the Congress has the authority to declare the permits and leases 

invalid and not fulfilling the trust responsibility, or is it a question 

of cancellation without compensation ?

Mr. Haughey. Well, I think perhaps the Congress could provide 

for the condemnation of these rights, all right, and provide for 

compensation. That, I think, would be constitutional, but I am not 

certain tha t this takes really quite tha t form, and it doesn’t—the 

objection from the companies’ standpoint is that it does not provide 

any guidelines, any measure as to what damages are to be taken into 

account, and it does not really take the form of a condemnation 

statute. What the parties are now talking about is to eliminate the constitutional problem by agreements which the department and eventually Congress would determine would be fair and the Congress would 

be willing to accept in lieu of the leases and permits, the rights they 

have now. Tha t would eliminate, I think, the constitutional problem 

entirely tha t I see exists in the present form of the bill.
23

Senator Melcher. OK. Mr. Portmann, you talked about three permits contiguous that AMAX has. If the Secretary had not imposed 

a prohibition against any further action, AMAX would not necessarily have developed a mine anyway, at this point, would they?

Mr. Portmann. Secretary Morton ? The moratorium at tha t point 

in time?

Senator Melcher. Yes.

Mr. Portmann. That is a difficult question to answer. It depends 

on all the variables. H ad that property—had all the parties involved 

been willing and anxious to develop the property, I think that we 

would have proceeded in a fashion that, if we were able to get the 

lease, tha t we would proceed with the necessary permitting, and 

tha t would have been through the time of the passage of the surface mining act, et cetera. If your question is would we have 

proceeded-----

Senator Melcher. If he had not imposed the 1974 moratorium, 

there is no assurance tha t AMAX would have mined 1 ton of coal 

or had one machine there ready to mine coal in the near future, is 

there ? Is n’t this all speculative ?

Mr. Portmann. Oh, I do not think so. I do not think you can 

say there is no assurance of tha t possibility. We could have proceeded had—you know, if the economics were right, if all the par ­

ties agreed. It is a very good quality coal, very high Btu, et cetera. 

From an economic standpoint, I would say tha t we would have. It 

is possible tha t we would have proceeded. It is very difficult to say, 

Senator.

Senator Melcher. It is really more likely you would still be s itting on those leases, would you not? If they had not gone to leases, 

if they had been permits, what would you have had, 3 years?

Mr. Portmann. We have tried, as a corporate policy, as company 

policy, not to sit on many of our permits unless we absolutely 

have to.

Senator Melcher. Wait a minute. I think sitting on a permit is 

one thing, but you hadn’t developed them into leases for 3 years.

Mr. Portmann. On our leases, we try to develop and mine, and 

not only to meet due diligence now, but just as a good corporate 

policy. We don’t like to sit on the land.

Senator Melcher. How many leases does AMAX have that have 

no mining equipment on them and nothing happening?

Mr. Portmann. I am unable to give you a figure, but I would 

imagine that the figure is very small compared to the leases that we 

do have tha t we are mining on.

Senator Melcher. Wait a minute.

Mr. P ortmann. If you are asking how many leases we have tha t 

no activity is-----

Senator Melcher. I don’t know what you call “activity”, but 

nothing being mined?

Mr. Portmann. I could submit a figure to you later, but I don’t 

know. I t is very few.

Senator Melcher. Half a dozen ?

Mr. P ortmann. I doubt if i t is tha t high at all.
24

Senator Melcher. Now, the current market is soft; isn’t that 

right? The coal market is real soft?

Mr. Portmann. In the industry, T believe it is right now, yes.

Senator Melciier. Are you the one who testified about the proposal to build the railroad line and open a mine nearby?

Mr. Portmann. T hat is my understanding, tha t there is development in the area.

Senator Melcher. On the other side of the Tongue River, off the 

reservation ?

Mr. P ortmann. Right.

Senator Melcher. What I would like from all of you is to provide 

us—and I don’t know how we can avoid this, but I don’t know how 

we are supposed to operate here to devise something if we don’t 

know what value is involved. I am requesting tha t you all provide 

the actual dollars spent on bids and royalties, actual dollars spent 

on drilling or exploration so that we have a figure. We have elicited 

from Mr. Harrison-----

Mr. Ferrand. Mr. Chairman, I will make an attempt to answer 

tha t question.

Senator Melcher. Very good.

Mr. Ferrand. Due to protests from our colleague companies, we 

have made an estimate that, including what Peabody has expended 

and what we are guessing the other companies have expended, total 

spent is not in the neighborhood of the $2.5 million indicated in 

other testimony, but it is probably closer to $20 million or more. 

We have certainly exceeded that amount ourselves—the amount that 

was indicated by Mr. Harrison.

Senator Melcher. He identified $2.5 million royalty. Does that 

sound about rig ht ? Excuse me; bonus—$2.5 million bonus at the time 

of the bid. Does that seem about right ?

Mr. F errand. I doubt if the bonus would exceed th at amount.

Senator Melcher. Then he identified tha t lease money had been 

paid, whatever the term is for it.

Mr. Ferrand. We paid rentals and advance royalties.

Senator Melcher. Rentals and advance royalties?

Mr. Ferrand. Yes.

Senator Melcher. And that is in an escrow fund and is accruing 

interest. Did he identify that as being worth about $2 million?

Mr. Ferrand. It is larger than that.

Senator Melcher. Fine. Fine.

Mr. Ferrand. That, sir, is from Peabody alone.

Senator Melcher. Peabody is the only one who has leases; is that 

righ t ?

Mr. Ferrand. Correct.

Senator Melcher. So that puts you in a different category?

Mr. Ferrand. Yes.

Senator Melcher. What are the other expenditures for exploration ?

Mr. Ferrand. For exploration—drilling and feasibility studies. 

Peabody also expended a considerable amount of money in furtherance of a contract to develop a gasification plant there, and we had 

signed a contract for delivery of coal. We did additional exploration 

based on tha t contract and exploratory engineering studies, all of 

which became inactive upon the Secretary’s 1974 decision.
25

Senator Melcher. Well, we have that identified in a different 

category. Feasibility studies, contracts for coal gasification, contracts 

for machinery, contracts to mine coal, contracts to sell coal are, in 

m y view, in the realm of speculation.

Mr. F errand. With your permission, I would characterize them as 

evidence of diligence of our actual and factual intent to develop the 

coal tha t we received in the lease.

Senator Melcher. Yes, but you can be diligent at the same time 

tha t it is speculation. There aren’t any coal gasification plants anywhere in the West that I am aware of.

Mr. F errand. No. There is one under construction, as you are probably aware, but at that time-----

Senator Melcher. Which one is tha t ?

Mr. F errand. T hat is the Great Plains project in North Dakota.

Senator Melcher. Is it under construction ?

Mr. F errand. It has been approved by the Federal E nergy Regulatory Commission and is scheduled to begin construction, I think, on 

April 1.

Senator Melcher. Well, that will be the first.

Mr. Ferrand. That will be the first major gasification plant.

Senator Melcher. And there are quite a few other coal gasification 

plants tha t have feasibility studies and from A to Z. I mean, feasibility 

studies on whether we get the money to build, and all sorts of things. 

T really think that it is difficult for us, as a committee, to attem pt to 

establish tha t as firm on tha t type of investment because we are so 

aware tha t there has been so much of tha t investment tha t has not 

borne any fruit and probably won’t bear any fruit because the market 

situation is not righ t or something else is not right, or an environmental impact statement can’t be corrected and bonds can’t be sold for 

the construction or the various regulatory agencies, whether they are 

State or Federal, won’t clear the purchase and sale of—the purchase of 

the natura l gas or the synthetic natural gas at tha t price and the sales 

to the customers involved under their jurisdiction. There is so much involved in that, that it is difficult for us to establish that as somebody’s 

responsibility.

I want to add this point. There has to be a difference in what was 

done prior to 1974 and what was done after 1974.

Mr. F errand. Yes. Mr. Chairman, I would add that the existence 

of the coal supply agreement and the bona fide contract with enforcement clauses, et cetera, is a recognized expression of due diligence in 

the legal regime for leasing. Further , I would like to concede the point 

tha t establishment of the value for these properties is, in fact, very 

difficult. It is one of the problems which we would like to solve with 

the amendment we propose, and that is th at there would be no evaluation either of the reserves, or no expression of what we are due in 

compensation in the way of dollars, either for what we have expended 

or for lost business opportunities. What, in fact, it would become is a 

negotiated settlement, not for our—the lawyers may correct me on 

that—not necessarily on our damages per se, but for our willingness 

to accept relinquishment of the leases and to forgo any litigated remedies. So there would be no attempt, in fact, to evaluate the coal prop-
26

erties that we would be granted in exchange for our agreement not to 

pursue those remedies.

Senator Melciier. I follow that point.

Mr. Ferrand. It is a very simple remedy to avoid the valuation 

problem.

Senator Melcher. It is a point well made, but let me repeat. We 

need to know investment dollars, both before 1974 and after 1974. 

Now, does this pose any problem to any of you ?

Mr. Ferrand. Mr. Chairman, we could submit them to you, hopefully in camera so that they are maintained as confidential.

Senator Melcher. Well, now, let me explain something. Jim will 

vouch for this. If we are going to present a bill, first to the committee 

and then to the Senate and then to the House, it is an obvious question 

how many dollars are involved, and no legislative body is going to vote 

on a settlement without asking how much value is involved. Not in the 

coal, but in actual expenditures.

Mr. Ferrand. I believe we can provide you that number.

Senator Melcher. Is tha t posing any problem to any of you?

Mr. H aughey. Mr. Chairman, you say before 1974. It seems to me 

we should present the whole investment that the companies have made 

and label when they were made so that if you think there is some 

distinction-----

Senator Melcher. Yes.

Mr. Ferrand. I would like to correct tha t impression, Mr. Chairman, because we are continuing to make payments. Our payments last 

year exceeded one-half a million dollars to the escrow fund.

Senator Melciier. Yes, I understand that.

Mr. Ferrand. And we will exceed that figure this year.

Senator Melciier. Yes, I understand that. You are required to do 

that or forgo your leases; is that correct ?

Mr. Ferrand. That is correct.

Mr. Haughey. Yes.

Senator Melcher. I understand that perfectly, and tha t money is 

just waiting there. But these other expenditures, prior to 1974, will 

make a difference to the committee and perhaps to individual Members 

of Congress if we want to assess whose responsibility it was. After 

1974, it is clear that there is a shift in responsibility. The Secretary, by 

his own issuing of his order of the moratorium, admitted some responsibility for an error.

Now, we don’t know, and I am not trying to declare to what extent 

he was admitting error at tha t time, but it is obvious he was admitting error in 1974 to some degree, and we can each contemplate within 

ourselves how much error he was admitting. But he was admitting to 

some error when he issued the order for moratorium.

Mr. Ferrand. The action of the Secretary in 1974 did not directly 

cancel the leases. I t gave us an opportunity to make a showing that, 

in fact, a waiver was warranted under the provision which the lease 

allegedly violated.

Mr. Haughey. But only with the tribe, which was not willing to 

participate in that.

Mr. Ferrand. That is correct. So it had a de facto effect, but as far 

as we were concerned, we had a continuing opportunity, and we are, 

in fact, making payments in furtherance of that opportunity, although
27

we have recognized that, in effect, it is not possible to pursue 

development.

Senator Melcher. Now, Mr. Dahlstrom, you suggested compensation by noncompetitive leases ?

Mr. Dahlstrom. Yes.

Senator Melcher. That is not, as I understand it, what Mr. Haughey described.

Mr. Dahlstrom. Well, there is some difference between the positions 

of the operating coal companies and ourselves. The operating coal 

companies are in the position to utilize contiguous acres to their existent operations. We have no existent operations. The object of acquiring 

this prospecting permit, as far as we were concerned, was to obtain 

lands on which a project could be established. So, as far as we are concerned, the loss of this prospecting permit is a loss of a major business 

opportunity.

Senator Melcher. Does it violate any proprietary righ t of your 

company to tell us at this moment what Chevron paid for the assignment of the permit ?

Mr. Dahlstrom. Well, as yet, we have not made that figure public. I 

am quite willing to give you the figure in camera. I am not prepared 

to discuss it here.

Mr. Ferrand. Mr. Chairman?

Senator Melcher. Yes?

Mr. F errand. So that there is no misunderstanding, the discussions 

that we have had with the Department, at least with respect to—I think 

I can speak for Peabody and AMAX and Consol—revolved around the 

possible issuance of leases, coal rights to Federal coal properties tha t 

really had very little or no economic value to the Government because 

they are in strategic locations th at would make them uncompetitive. 

They are either adjunct to existing operations, meaning that no one 

else would conceivably bid on them except the companies involved 

here, or they are what I am sure you are familiar with, checkerboard 

areas where the odd-numbered sections are, in fact, owned by p articipating companies.

With respect to Chevron—and I am at some risk here speaking on 

behalf of Mr. Dahlstrom—but they have a unique problem. We would 

suggest, respectfully, that there are other remedies that they could 

pursue, either as individual noncompetitive leases, as he indicated, or 

in the acceptance of other mineral properties, which is permissible 

under the Mineral Leasing Act.

Senator Melcher. Jim , I wonder if I could use the word “credits” 

to describe what you were proposing.

Mr. Haughey. Credits ? Was that the word ?

Senator Melcher. Yes.

Mr. H auc.hey. Well, T think perhaps it is a pretty b'road word, but 

I think it would encompass that concept, all right. Credits with respect 

to agreed-upon acreage which is adjunct to a lessee/permittee’s existing-outside-the-reservation properties, or perhaps credits—perhaps 

one of them Mr. Dahlstrom may have in mind—credits for bidding 

rights at competitive sales, too, if, for instance, the lands for some 

reason are not suitable for mining or not available for leasing perhaps because, for instance, of the surface owner consent requirement in 

the Strip Mining Act. So that if the companies could not agree with
28

the De pa rtm ent upo n ad jun ct pro perties th at were desirab le for the 

pa rticul ar compa ny, b ut no t g ene rally des irab le fo r oth er com petitive 

bidders, the y could not find such a prop erty suitable to the company 

and to the De partm ent, the n in the alt erna tiv e, as I understand the 

discussions, there migh t be altern ati ve bidd ing righ ts or credits , you 

might say, ag ain st------

Senator Melcher. Bid din g credits ?

Mr. Haugiiey. Com petitive bid din g, yes, in other sales. Is th at 

correct ?

Mr. F errand. Yes. The concept of bidd ing rig hts, Mr. Ch airma n, 

was in the event th at an y, or th at pa rt, o r all o f the chosen pro pertie s, 

if you w ill, given in settlem ent, were deemed u nsu itab le, the values for 

or whatever, the n the altern ative com pen sation—ra th er th an havin g 

to go and reselect an are a—th e alt erna tiv e com pensation was bidd ing 

rig hts in accorda nce with a for mu la th at would be spelled out in our 

ind ividual agreem ents with the Se cre tary.

Se nator Melcher. Let me be can did with all of you. It would seem 

very difficult to me, and perha ps impossible, to pa ss legisla tion in Con ­

gress to solve this witho ut an un de rst an ding of actual out-of-pocke t 

money th at is invo lved , even on coal t hat A M AX or Consol or Peabody 

migh t be wa nting to acquir e because it is ad jac ent to an ongo ing minin g 

ope ration. They are o bviously g oin g to be the com panies who get t hat 

Fe deral coal. I t is my un de rst an ding the pro cedure now is th at the 

value is plac ed on th at coal, even t ho ug h there is no one else b idding on 

it, and th at value is collective.

Recalling an inc ide nt just a few mo nth s ago, a Western en tity acquired a qu arter section of Fe deral coal, and there was a value placed 

on it, if I am not m istake n, of around $1.50 a ton. Is th at correct?

Mr. F errand. I am not famili ar wi th tha t.

Senator Melcher. I s th at the righ t proce dure ?

Mr. F errand. Th ere is established on any sale, as a res ult of the 

passage of the C oal Le asi ng Limi ts Ac t o f 1976, a minimum acce ptable 

bid which is determ ine d by, ap pa rently, a for mu la which has no t yet 

been fully devised by the Dep artm en t of the In terio r. So there is a 

min imum am ount esta blis hed on pe r trac t—n ot per ton, pe r trac t— 

what the G overnm ent w ould be willing to accept. Th at is not a nu mb er 

th at is published in any case, and if we a re com petitive bidder s, eit he r 

singly or if the re are several bid ders, then we have to shoot at th at 

unk now n mark. We have to try to exceed it in ord er to get the lease. 

In some cases, the com panies hav e no t been able to exceed th at mark, 

and the lease is not issued.

Senator Melcher. I t is my un de rstand ing th at in this instance . 

We stern was the only one who could conceivably mine it and th at 

the re were no othe r bidders.

Mr. F errand. I f i t is the case t hat I am fa m ili ar w ith, in fac t, the y 

refu sed to bid because the min imu m acceptable bid amount exceeded 

wh at they thou gh t was the valu e of the coal, and the coal did not 

issue. An d the Dep artm en t’s option now is to conside r reissu ing the 

lease or reoffering the lease and tryin g to determ ine a different m ini ­

mum accepta ble bid.

Senator Melcher. Now, is th at the type of Fe deral coal th at you 

were spe aking of. th at you describ ed?

Mr. F errand. Yes.
29

Se na tor Melcher. Bo th of you, Pea body and AM AX ?

Mr. F erraxd. Th e Dep artm en t ind ica ted in its discussion with us 

th at they were relucta nt to give us new mining opportu nities , bu t 

they would be willin g to offer us coal which had min ima l value to 

them because the re was lit tle op po rtu nity fo r com petitive bid din g 

bu t might have intrinsic valu e to us as ad junc ts to existing pr op ­

erties or ope rations .

Se nator Melcher. I s th at wh at you are des crib ing?

Mr. P ortmann. Tha t is our un de rst an din g.

Mr. AV ooten. Yes, sir. Mr. Ch air man, ea rlier I men tioned about 

the rou nd ing o ut of an LM U, and while these paym ents cannot establish a logical minin g un it in and of them selves, the y can rou nd them 

out.

Se nator Melcher. Jim , the pro ced ure th at you described is some 

so rt of a procedure where it would be an establ ished bidd ing cre dit 

fo r such. Is th at tru e?

Mr. H aughey. Yes, sir. Tha t is tru e.

Se na tor Melcher. Tha t is not wh at Chevr on could use ; is th at 

righ t ?

Mr. Dahlstrom. I am no t quite sure th at there is exa ct com mun ication between the chair ma n and the other mem bers of the pan el or 

myself, because it was my imp ression th at there would be an exchange of lan ds wi tho ut a deter mi natio n of t he relativ e values of the 

lan ds being exchange d.

Se na tor Melcher. I do n’t th in k th at is wh at you testified to.

Mr. F erraxd. It is a very fine point, Mr. Ch air ma n. We wa nt to 

avoid the concept of exchang es because th at pu ts us in a different 

lega l realm. Ra ther, this is no t exchanges of lan d or coal righ ts but 

exch ange s of coal rig hts fo r the com pan ies’ acceptance of a relin ­

quishme nt—and for our willing ness to sign agr eem ents th at we will 

not pu rsue li tig ation with respect to th e N orthern Che yenne p rop erties.

Se nator Melcher. I un de rst an d th at pa rt. Bu t wh at I wa nt to 

un derst and is who gets what. Jim , you were speak ing of a cer tain 

value bein g attached to leases and you describ ed th at value as b idd ing 

cre dits; is th at a good ter m?

Mr. H aughey. W ell, T hesitate to tr y to clar ify the po int because I 

have n ot been involve d in the most recent discussions between the companies an d the De partm ent. My own u nd erstan ding is th at the value o f 

the coal to the G ove rnm ent—at least of th e off- reservatio n coal which 

migh t be leased to a pa rti cu la r com pan y—w ould be establis hed , I 

would say. by the Federal Government, and it would not exceed the 

valu e of these coal reserves th at the com pan y thinks it has on the 

reserv atio n. In oth er words, we are not ask ing for $10 in place of $1. 

AVhat it is more likely to be is a much lesser amo unt than the v alu e of 

the reserves on the reserv ation, bu t Ch ris, pe rhaps you ha d bette r 

clar ify that.

Mr. F erraxd. The p oint is th at the bidd ing rig hts tha t we would get 

would be in acco rdan ce with a formu la th at did not rel ate to the 

Cheyenne prop ert ies at all. It would only relate to wh at we agr eed 

upon might be a value, for pa rt or all. on a percen tage basis, or w ha tever, of the reserves th at we would agre e to accept as settlem ent.

Se nator Melcher. I don’t know wh eth er we are ge tti ng any where 

or not.
30

Mr. H atjghey. May I in ter jec t this one comm ent?

Senator Melcher. W ha t this bill seeks to do is keep you whole in 

terms o f act ual investm ent. T he bill does n ot seek to set u p the op po rtu nity for sim ila r coal somewhere else, and if you are talking abo ut 

bid din g rig hts , bidd ing c red its based on actua l do lla r inv estment, we 

might have som ething to work out. If you are talk ing abo ut bidd ing 

rig hts based on wh at the poten tial was of the leases or the perm its, 

then I do no t th in k we have a ny thing to g o on.

Mr. H augiie y. I m igh t say that it is my und ersta nd ing , a t le ast, th at 

the agreem ent between the company and the De partm ent, as mad e, 

would fina lly be ret urned to Congres s and yo ur com mittee fo r considera tion so th at if it was conceived th at i t was an u nfa ir exchange , 

an un fa ir am ount of valu e goi ng t o the com pany, it could be vetoed.

Senator Melciier. Yes. Tha t is why I am tryin g to be very candid. 

Any pro posal th at reached us in the committee, wh eth er it is in this 

Select Com mittee on In dian Aff airs or w hethe r it is th e Senate Committee on En erg y, th at att em pte d to tran slate do lla r inv estment on 

these perm its and leases—w hich are not going a nyw here—to be compensate d by some op po rtu nity for like amounts of coal, Fe de ral coal 

somewhere else, I think, would be bu rie d so deeply in the com mittee 

th at you wou ld ne ver find it.

Mr. F errand. Mr. Ch air ma n, the one misimp ress ion we may have 

given, the tilings t hat we would ask for, the am ount of coal whi ch we 

would be wil ling to accept fro m th e Secre tar y as settleme nt for our 

claim s—at least I can speak from P eabody’s stan dp oint—would no t be 

an amount th at any where near appro aches wh at we are g iving up in 

the way of leases, or would be willing to give up in the w ay of leases, 

on the rese rvation . It is a small fra ction the reo f. From th e Se cretary’s 

standpoint , he is g ett ing , in behalf of the t rib e, a very valua ble p ro perty and giv ing up a prop erty which to him has very minim al value 

because he can not issue it successfully in a com petitive sale because 

the re is only one possible bidder. Tha t is a very im po rta nt d istinc tion.

Senator Melcher. I un derst and th at , bu t I th in k you have to pu t 

it in terms o f d ollars , and as lon g as even th e n oncompetitive leases are 

app roa che d in terms o f dollars , I th in k we can ta lk a bout th at. Wh en 

you said we are n ot talking about the value of t he coal, I th ou gh t we 

were talk ing abo ut the same t hi ng because I do not think we can talk 

about th e v alue of the coal.

Mr. F errand. I t is rea lly the value of, I guess, ou r willing ness to 

clear tit le to the p roperties in question on t he r ese rva tion and to drop 

the pu rsui t of liti gatio n.

Se nator Melcher. Yes, I un derst and th at p oin t. Clint , d id you h ave 

som ething you wa nte d to say ?

Mr. Dahlstrom. It is possible th at Chevr on would con sider an arrangem ent , such as the coal com panies are con siderin g, on othe r mi nerals, othe r leasable m inerals, so t hat conceivab ly we m igh t be able to 

make some arr angeme nt on oil sh ale or ph osp hat e. We were inv estig ating th at pos sibility which wou ld enable us to resolve ou r prob lems 

af te r the fashion th at is proposed by Pea body, et al. Now, we have 

not yet conc luded our inv estiga tions of th at possibility, so I cannot 

say th at there is such an op po rtu nity fo r sure, bu t it is dis tin ctly 

possible.
31

Se na tor Melcher. I th in k there is anoth er advanta ge for me bein g 

very candid wi th you in th is ma tte r. You could rea ch som ething 

en tirely satisfacto ry with you rselves an d wi th the Dep artm en t of 

In te rior and find th at it is the most unsaleable item in Con gress and 

you hav e gotten nowhere. Th e tri be has g ott en n owhere an d you have 

go tte r nowhere. All you have go tte n is some un de rst an ding of the 

In te rior De partm ent. I have to accept Mr. Har riso n’s testimony th at 

he believes th at legislation is nece ssary, and I wou ld assure you t hat 

I th in k it is absolut ely esse ntia l because I do no t th in k any arra ng ement th at the De partm ent of In te rior would make wi th you people 

would hav e a chance of flying unle ss it was leg isla ted. I th in k Congress wou ld step in almost imm ediately.

Mr. F errand. M r. Ch airma n, there is one discussio n th at we m ight 

make, or at lea st from Pe abody’s s tan dp oint. I can not spe ak fo r the 

oth er companies, bu t one possibility is th at each of us wou ld proceed 

to negotiate a pro posed settlement wi th the Secre tar y, and then the 

com mittee could conside r wh eth er it wou ld affirm those agreem ents 

and autho riz e the provisio n of settlement.

Se na tor Melcher. Yes. I th in k th at is very practic al, and I wou ld 

encourage you to do that. But I hope you see whe re we are com ing 

fro m an d proceed along th at line because I think I hav e some ju dg ­

ment on wh at will be accepta ble in C ongress and wh at we can prese nt 

in a pos itiv e metho d to the committee, to the Senate—o f course, this 

is rep eated in th e Ho use—and de fen d it as a prope r proce dure to follow.

I can un de rst an d your po int about no t wa nting leg islation passed 

th at says yo ur leases are canceled and your p erm its a re canceled, and 

the n you negotia te out wh at you ge t ou t of that. I can un de rstand 

yo ur po int very clearly on tha t. Th e p urp ose of th e bi ll is to elic it from 

all pa rti es involve d, the tribe , you people, rep res entin g the coal companies, a nd th e De pa rtm ent of the Inter ior, on th e p roc edu res th at can 

be acceptable. An d when we know wh at th at pro ced ure is, we can 

inc orporat e that in the bill.

I wou ld like to do th at th is year . Time is ge tting very sho rt. If we 

expect to pass a bill this yea r, we should have all of the d at a in ha nd 

in the next 3 or 4 weeks. No late r th an t ha t. Th is is alm ost the end of 

Ma rch, and any bill th at is no t ou t of com mittee in a year like this 

when the Congress intends to ad jour n pr io r to the election date, if 

you a re no t ou t o f c ommittee by the first of Jun e, yo u be tte r feel th at 

you are in jeopa rdy in pas sing the bill this pa rticul ar year.

Mr. F errand. So th at I un de rst an d wh at you a re r equ esting us to do, 

Mr. Ch airm an ; we should go ahead and actua lly come to an agree ­

ment, proposed agreem ent, with the Secre tary, and then sub mit it for 

your co ns iderati on ; is th at it?

Se na tor Melcher. C orrect. We w ill subm it it in your b eh alf to the 

com mittee, an d the Dep artm en t also will. Ple ase p rov ide the c ommittee—a nd we w ill, fo r the tim e b eing, hold an ything you wa nt held as 

con fide ntial, in camera. Is that the legal ter m ?

Mr. Haughey. Yes.

Se na tor Melcher. W e will hold it confidential un til you tell u s w ha t 

you wan t held confide ntial in terms of d oll ars spent, a nd we will resp ect 

th at request.

Th an k yo u a ll v ery much.
32

Mr. F errand. Th an k you.

Mr. Dahlstrom. Th an k you.

Se nator Melcher. Th e las t witn ess th is m orn ing is A llen Rowla nd, 

presi dent of the No rth ern Cheyenne Council, and he is accompa nied 

by Steven Chestnut.

Ple ase proceed.

STATEM ENT OF ALLEN ROWLAND, PRESIDEN T, NORTHERN

CHEYENNE TRIBA L COUNCIL, ACCOMPANIED BY STEV EN

CHESTNUT, ATTORNEY AND DOUG RICHARDSON, COUNCIL OF

ENE RGY RESOURCE TRIBE S

Mr. Rowland. Mr. Chairma n, my name is A llen R owland. Th e gentleman on my left here is Steven Chest nut, an att orney fo r the tribe, 

and the gen tlem an on my righ t is Doug Ric hards on, a form er tri ba l 

employee who now works for the Council of En ergy Resource T ribes.

I am Allen Row land , pre sid ent of the No rth ern Cheyenne Tr ibal 

Council. Th is statem ent is made on beha lf of the No rth ern Cheyenne 

Tribe . We No rth ern Cheyennes are d eep ly appre cia tiv e of th e court esies and con sideration s exte nde d to us by this com mittee and its staff 

in connection with the prep aration and con sidera tion of S. 2126. F u rthe rmore , we feel deeply indebted to the chair ma n of the committee, 

Se nator M elcher, for the courtesy, concern , effort, and su pp ort he has 

exh ibited du rin g the pa st iy 2

 years in connection wi th ou r endeavor 

to effect a just and final legisla tive resolu tion of the problem ad ­

dressed by S. 2126.

The No rth ern Cheyenne Tr ibe urg es the enactme nt of S. 2126. If 

enacted, th is leg isla tion would at las t resolve an ove rwh elm ing prob ­

lem which has thre ate ned, haunted , and grieved o ur people since ea rly 

1973 when we first re alized its en orm ity. Since t hat time in early 1973, 

we have ste ad fastly and strenuously sought ter mina tio n of a ll claims 

under all coal perm its and leases pre sentl y clouding ou r reservatio n. 

En actm ent of th is proposed legislation would br ing this effo rt to a 

successful and , we believe, equ itable conclusion.

From th e o utse t, it has been ou r be lief t hat the U nited Sta tes , and in 

pa rti cu lar the Bu rea u of In di an Affairs and the U.S . Geological Su rvey, bear p rim ary res ponsibility fo r th e u nconscionable na ture of these 

perm its and leases. Accordingly, in th e sp rin g of 1973, we asked the 

Secre tary of th e In te rior to conduct a fa ir and objective review of the 

per formance of his De pa rtm en t in form ulating and ap prov ing these 

coal tra nsact ion s. We arg ued th at such a review would disclose a 

shockin g level of irr eg ularity and inco mpe tence on the par t of the 

De pa rtm ent of the In terio r, and t hat as trus tee , th e S ecret ary m ust lift 

the b urd en of th at d isgrac efu l perfo rm ance from t he sh oulders of the 

tri be and the rese rvation . We buttress ed th is request fo r sec retarial 

acti on by an extensive wr itten pe tition to the Secre tar y, which, in 

meticulous and extensive detai l, set fo rth the res ult s of ou r fac tua l 

inv est iga tion and legal analy sis o f the ad minist rativ e record in these 

coal tra nsact ion s. We have filed herew ith a copy of th at pet itio n.

Ou r inv estiga tion and analy sis reveale d an overall record of ille ­

ga lity which affected every coal pe rm it a nd lease issued on the Northe rn 

Cheyenne Reservation. The law vio lation s were so serious, so basic,
38

an d so nu me rou s t hat no p ermit or lease enforceable ag ains t the tribe 

or the res erv ation could hav e been cre ate d. We confined our petition 

to matters which, we believed, req uir ed the Se cre tar y to set aside the 

tra nsactio ns as a matter of law. We con tended th at a sec ret ari al exam inati on of the Dep artm en t’s own reco rds, and the appli cab le law, 

would compel the Secre tary, as tru ste e of In di an reso urces an d as C hie f 

Ex ecutive Officer o f the Dep artm en t of the In te rior , to act prom ptly 

to set aside the perm its and leases. In th is effort, we relied on the 

integr ity of our Government to honor an d resp ect its laws and on 

the integr ity of the Secre tary in the enforcement of those laws.

I will atte m pt now to summ arize' the events which hav e led us to 

th at point.

In December 1965, the fir st serious expression of outside int ere st 

in th e N orthern C heyenne coal reserve occurre d. A consu ltin g geologist 

subm itte d a proposa l for the issuance of an exclu sive pro spe cting 

pe rm it which wou ld include a righ t to n eg oti ate a mini ng lease d ur ing 

the ter m of the 1

 perm it. The Bu rea u of In di an Affairs recommended 

th at it would be be tte r to sell by public advertis em ent fo r bids. In 

early 1966, the tri be autho rized the BI A to dra ft the necessary documents fo r such a public sale.

The BIA prep ared a for m of mining pe rm it to be offered for bid 

by ad ap tin g an official form lon g in use under De pa rtm en t of the 

In te rior reg ula tions. The official for m provide d fo r an exclu sive prospec ting pe rm it with an option to lease only a portion of the acreage 

covered by the perm it. How ever, on No rth ern Cheyenne, th is option 

lan guage was expanded su bstan tia lly an d then main tai ne d in th at 

for m throu gh ou t that in iti al pu blic sale an d the two sub sequent N or th ­

ern Che yen ne public coal sales w hich occ urred in 1969 an d 1971, respe ctively. Th is option pro vision has since been used by the successful 

bid der s to lay claim to vast portions of the res erv ation land area.

Th e pe rm it dr af te d fo r the first No rth ern Cheyenne coal sale contai ned no effective env ironm ent al or res tor ati on provisions, and the 

att ached lease conta ine d only a solitary provision bind ing the lessee, 

and I quote, “to coo perate fully wi th the lessor and the Se cretary'’, 

in re seeding str ipmined areas.

A successfu l bidd er would acquire a str ip min ing pe rm it and an 

option to en ter into a str ipmining lease. The pe rm it covered the explo rat ion phase. Ac tua l mini ng would be pe rfo rm ed under the leases. 

Ke gre ttably , the ter ms and con ditions of th e mini ng lease were est ablished at the tim e of the offerin g of the pe rm it when both the tribe 

and the BIA were essent ially igno rant of the na ture and valu e o f 

the coal rese rve covered by the lease. Th is form at was followed in 

the second and th ird No rth ern Cheyenne coal sales as well.

The pr im ar y financial term of the lease—t he royalty on prod uc ­

tio n—w as set in 1966 at 17i/2

 cents pe r ton fo r coal delivered off the 

reserv ation, and 15 cents pe r ton fo r coal consumed on the reserv ation 

for th e firs t 10 years o f the lease, increa sin g to 20 cents a nd 17i£ cents, 

respectively, du ring the second 10 years of the lease. These royalty 

rates rem ained unc han ged throug h the second and th ird coal sales.

Th e firs t sale too k place in Ju ly 1966 and offered appro xim ate ly 

94,000 acres of res erv ation lan d. Comp etitive bidd ing was lim ite d to 

the bonus to be pa id pe r acre fo r the privileg e of p ros pecting a nd the
34

accompanying lease option. Only two bids were received, both from 

Se ntry Ro yalty Co., a wholly owned subsidi ary of Pea body Coal Co. 

Se ntry made a bonus bid o f 12 cents per acre, co vering the entire 94,000 

acres, for a total bid o f $11,296.80. B IA officials quickly expressed th eir 

satisfaction , a nd the trib e g ranted a perm it. T hus, t he firs t footho ld on 

the N orthern C heyenne coal reserve was established, a nd th e B IA had 

set the p atte rn to be followed in the two subsequent coal sales.

By 1968, th e tribe h ad received ind ica tio ns of fu rthe r inter est in its 

coal. Th is led to the offe ring fo r bid of ye t a no ther 128,316 acres in the 

summer of 1969. In t hat second coal sale, Peabody Coal Co. acquired 

three more tra cts of reserv atio n mineral lan ds conta ini ng 6,000 acres, 

21,860 acres, an d 27,530 acres.

La ter, a th ir d coal sale was scheduled fo r A pr il 1971. App roxima tel y 

367,000 acres of reserv ation lan d were offered. Twe lve bid ders partic ipa ted in the sale, includ ing representat ive s of la rge coal an d e nergy 

corporation s, as well as in div idu als. A lth ou gh Fed eral re gulat ion s and 

the co ndition s of the sale pro hib ite d issuance of p erm its to anyon e n ot 

a bona fide coal mini ng op era tor cap able an d qualified by experience 

and resources to con duct a ctual mini ng op eration s, no effort was m ade 

by th e B IA to in quire into the qualifications of th e bidders. A s a res ult, 

sub sta nti al tra cts were acq uire d by pr ivate ind ivi duals whose ability 

to develop th e resource is hig hly doubtfu l.

The following perm its were acquire d: Bruce En nis , 16,220 acres; 

Norsw orthy and Reg er, 14,000 acr es; Nosworthy and Reg er, 19,420 

ac res; Mead owlark Fa rm s, or A MAX , 23,040 acres, 20,960 acres, 27,550 

acres; and Bru ce En nis , 27,790 acr es; and Conso lidatio n Coal Co., 

23,400 acres.

As ind icated earlier, the first an d second coal sales res ulted in the 

acquisition by Peabo dy Coal Co., throug h its subsidiary Se ntry Ro yalt y Co., of pe rm its covering 94,000, 6,000, 21,860, and 27,530 acres. 

How ever, the reg ula tions at 25 CFR 171.9 set an acreag e lim ita tio n 

of 2,560 acres on leases and on perm its incorporating opt ion s to lease. 

Un de r the reg ula tio n, the a creage lim ita tio n may be exceeded only if 

two con ditions are me t: Th e larg er acre age m ust be necessary fo r the 

establ ishment of thermal electri c po we rplan ts or oth er indu stria l fa ­

cilities, and the excessive acreag e mu st be in the intere sts o f the tribe.

But, throug ho ut the first, second, and th ird coal sales, the acre age 

lim ita tio n was disreg ard ed. In fac t, the e ntire r ese rva tion, sub divided 

into immense tra cts , was offered du ring the course of the three coal 

sales. Fr om t he ir v ast p erm it acreages, the permitte es hav e since purported to exercise the righ t to obtai n m ini ng leases c overing the follow ­

ing acreag es: Pea body Coal Co., 41,680 acres; AM AX , Inc ., 71,550 

acres; Conso lidatio n Coal Co., 15,300 a cre s; Chevron Oil Co., th roug h 

assignment from Bru ce Ennis, 27,390 acr es; No rth ern State s Power 

Co., th roug h assign ment fro m No rsw orthy and Reg er, 33,420 acres; 

and No rsw orthy and Reg er, 16,220 acres.

Meanwhile, in Ja nu ar y 1969, a critical legal develop men t ha d occurred. T he Se cre tar y o f th e I nt er io r prom ulgated en vironme nta l p ro ­

tection r egula tio ns go verning surface m ining In di an lands. Th e regu ­

lation s w ere the prod uct o f 2 years o f stu dy by the D epart ment. They 

establis hed a co mprehen sive scheme of controls de signed to insure that 

any surfac e mini ng on an In di an res erv ation would tak e place only 

af te r Federal s tudies h ad es tab lished s tand ards to be wr itten into any
36

permit or lease protecting a broad array of ecological, social, and 

cultural values.

However, the BIA proved itself either unable or unwilling to implement the admirable intent of this regulation. No procedures were 

established by the BIA for the implementation of the regulations. And 

no steps were taken to establish staff, either in the BIA or in its 

technical support agency, the U.S. Geological Survey, capable or willing to perform the required technical examination. Therefore, although the regulation was in force, the second coal sale was formulated with, at best, token compliance. As a result, no provisions meaningfully protective of ecological, social, and cultural values were 

incorporated in the permit or attached leases.

Approximately 1 year later in mid-1970, Peabody Coal Co. sought 

to obtain the issuance of six leases arising from the 94,000-acre tract it 

had acquired in the first coal sale. Though clear th at part 177 applied 

to Peabody’s lease applications, the BIA failed, just as it had in the 

second coal sale, to implement the terms of part 177. The identical 

pattern was repeated in 1971 during the formulation of the third 

Northern Cheyenne coal sale.

In May 1973, long afte r the issuance of the permits arising from 

the second coal sale and the six Peabody leases and the issuance of 

the permits arising from the thir d coal sale, the BIA issued two 

documents entitled, respectively, “Technical Assessment, Coal Leases, 

Northern Cheyenne Reservation,” and “Technical Assessment, Coal 

Permits, Northern Cheyenne Reservation.” The documents expressly 

admit tha t they are after-the-fact technical examinations. The permit 

technical examination was so callous as to recommend tha t the sale 

2 and 3 permits “be issued” though in fact they had been issued several 

years before.

The lease technical examination reeled off a parade of potential consequences of strip mining including, “destruction of Cheyenne culture, 

the lifestyle of the people,” “Cheyenne become a minority in their own 

homeland,” “pollution of all sorts; that is, human, cultural, air, sound, 

noise, et cetera.”

Prior to the time of the third coal sale, several other significant developments had occurred. On J anuary 1, 1970, the National Environmental Policy Act of 1969 had become effective. The act required an 

environmental impact statement in connection with every recommendation on major Federal actions significantly affecting the quality of 

the human environment.

In February 1971, the U.S. Geological Survey recommended changing the royalty basis for coal leases on Federal lands from a fixed tonnage royalty to a percentage of gross sales. Specifically, it was recommended that 5 percent of gross sales be the standard provision for coal 

leases on Federal lands.

Notwithstanding these developments, the B IA went ahead with the 

third coal sale, oblivious to the requirements of the two new acts and 

using the same royalty formulas which were used in the 1966 and 1969 

sales.

Finally, beginning in late 1972, the Northern Cheyenne tribal leadership began to comprehend the enormous threat these transactions 

posed to the reservation and its people. I t soon became apparent that 

the involved BIA personnel, on whose advice and counsel the tribe
36

relied in enter ing into these t ran sac tions, h ad been ine pt, u nin forme d, 

and sadly ov erm atch ed.

In March 1973, the t rib e enacted a resolu tion callin g upon the Secretary of the In te rior to w ithdra w his approv al of all e xis tin g p erm its 

and leases. Sh ortly th ereafte r, we re tained leg al counsel to pr ep are the 

wr itten p eti tio n to the Secre tary of th e In te rior which I hav e alr eady 

discussed. Tha t petiti on deta iled a sta gg ering ar ra y of law violations 

by the B I A and , to a lesser extent , the US GS , inc ide nt to the first, 

second, and th ird No rth ern Che yenne coal sales.

In response to the tri be ’s petitio n, Se cre tar y of the In te rior Rog ers 

C. B. Morton issued a written state me nt on J un e 4 ,1974.1

 I n f or m ulating his decision, the Secre tary was subjected to inte nse lob bying on 

the p ar t of th e BIA a rea office and centr al office personnel responsible 

for the formula tion and app rov al of the N orthern Cheyenne coal leases 

who considered the trib e’s att ack to be a challenge to th ei r person al 

rep uta tio n, professional sta nding , and job security. In addit ion , we 

understand th at th e Secre tary's lega l adviser, the Solicitor of the Depa rtm ent of the In terio r, for reasons un rel ate d to the meri t of the 

tri be ’s claim s, advised again st ex pli cit sec retarial find ings of wrongdoing and illegali ty on the par t of the De partm ent. As a res ult, the 

decision of t he Se cre tary contains no cl ear -cu t findings of de pa rtm en tal 

wrongdoing . Ind eed , the S ecret ary elected to r efrain fro m addre ssing 

all b ut a few o f the tr ib e’s legal claims.

At the same tim e, the Secre tar y and the Solicitor were cle arly 

impressed by the weigh t of the trib e’s claim s. In ad dit ion , and pe rhap s more im po rta ntly, it was ap pa rent t hat the Se cre tar y conc luded 

th at the sta te of affairs the n existing on the No rth ern Cheyenne 

Reservation was into lera ble. Clearly, he decided th at in good conscience, he could not confirm the massive strip minin g right s which h ad 

pu rportedly been gran ted to the coal comp anies. Moreover, he reco gnized th at to do so would res ult in fierce criticism and public outrage.

Thus, a decision was crafted fo r the pur pose of resto rin g the ba lance of pow er to the trib e. Th is was achieved by rel ying fund am en ­

tal ly on the Se cretary’s strongest suit, his statutor ily based discre ­

tionary au thor ity over In dian lan d tra nsact ion s. No pe rm its or leases 

were declared inv alid. Inste ad , the Se cre tar y in effect held th at , on 

several different gro unds, the coal com panies had not yet obtained 

fully ma tur ed ri gh ts to mine.

A p rin cipal g roun d was the acre age lim ita tio n fou nd in th e ap pli cable r egula tions w hich lim its m ini ng leases to 2,560 acres and provides 

for a waiver of this lim ita tio n on specifically sta ted grou nds. Ho lding 

th at no such waiver had occ urred, the Secre tary directed the coal 

comp anies and the tribe to either reduce all the leases and lease ap ­

plications to 2,560 acres o r jointly de mo nstrate th at the a creage lim ita ­

tion should be waived. Th roug h the impos ition of this acre age lim ita ­

tion, the Secre tar y att em pte d to dram ati cally redu ce the scope of 

the coal com pany claims.

In addit ion , the Secre tar y held th at ap pr op riate env ironm ental 

imp act statem ents would hav e to be prep ared before he would consider ap prov ing any minin g pla ns, pe rm it rene wals, or leases.

1

 See p. 44.
37

Finally, he made the following statements of policy:

As trustee, I take cognizance of mjT responsibility to preserve the environment 

and culture of the Northern Cheyenne Tribe and will not subordinate these interests to anyone’s desires to develop the national resources on that reservation. 

Furthermore, the tribe and the coal companies may be assured that the terms 

and conditions upon which mineral development may proceed on the Northern 

Cheyenne Reservation will require their joint agreement and support prior 

to any further approval by me.

Since the issuance of the Morton decision, no environmental impact 

statements regarding coal development on our reservation have been 

performed. We m aintain tha t so long as no lawful, tribally supported 

proposals for reservation coal development exist, the environmental 

impact studies are not in order.

In addition, the tribe has manifested to the coal companies their 

unwillingness to provide them with joint agreement and support of 

reservation coal development derived from the existing transactions.

This decision has now remained intact for almost 6 years. On the 

positive side, it has enabled the tribe to regain physical control of 

the reservation from the coal companies. On the other hand, the secretarial decision did not extinguish, and has failed to induce the coal 

companies to relinquish, any legal claims arising from the permits 

and leases. Thus, at this very moment, the tribe’s title to more than 

200,000 acres of reservation mineral lands remain encumbered by the 

cloud of these permits and leases.

Since Secretary Morton’s 1974 decision, we have repeatedly asked 

his successors to provide justice to the tribe on this matter, but to 

no avail. As a result, we have considered the option of commencing 

litigation against the United States and the companies to clear title 

and for substantial monetary damages. However, afte r careful consideration, we have concluded tha t factors of cost and protracted 

delay and continuing uncertainty during the several levels of tria l and 

appeal make litigation a matter of last recourse. For these reasons, 

we have more recently embarked upon yet another course to resolve 

this problem.

As the chairman of this committee well knows, over the past 2 

years, the tribe has initiated a major effort to achieve a resolution of 

this leasing impasse through nonlitigation means. The approach 

developed by the tribe during this period has sought to achieve an 

equitable resolution to the conflict through reliance on a reasonable 

legislative solution. S. 2126 represents the current culmination of 

tribal efforts in this respect and it embodies the principle of the balanced, constructive approach we have sought to foster.

This approach, it should be noted, is also consistent with Federal 

energy policy and national energy needs. The current administration has frequently expressed the concern that Federal agencies cut 

down on court cases and eliminate long, drawn-out litigation by substitu ting negotiated solutions when possible. Secretary Andrus echoed 

this concern in a recent speech, February 1978, stating tha t energy 

and environmental conflicts too often have to be settled in court, 

causing slowdown in vital energy production.
38

Furth er endorsement by the adm inist ratio n fo r th e ty pe of a pproa ch 

tak en by S. 2126 appears in Presi dent Carter's M ay 23, 1977, e nviro nmental message to’Congress.

Fu rth ermo re, congres sion al concern for the prop er use a nd disposition of the No rth ern Cheyenne mineral reserve is well established. 

On repeated occasions since 1926, Congres s has, th ro ug h legisla tion , 

demo nstrated an explicit and continuing inter est in the con trol and 

development of the m ine ral lands of the No rth ern Chey enne. In 1926, 

in the N orthe rn Cheyenne Allotme nt Act, A ct of Ju ne 3,1926, 44 Stat. 

690, Congress determ ine d to pres erve tri ba l owner ship and develop ­

me nt control over all reservatio n minerals and, the ref ore, excluded 

them from allo tme nt. In addit ion , Congress expli cit ly preser ved a 

continuing autho rit y to c ontrol and m anage all trib al una llo tte d land s, 

includ ing the miner al lands.

In 1961, Congress amended the No rth ern Cheyenne Allotme nt Ac t 

to specifically a uth orize developm ent of t riba l m ineral lan ds in a cco rdance with the pro visions of the gener ally applicab le Omnibus Tr ibal 

Miner als Leasing Act. In 1968, Congre ss fu rther amended the Nor th ­

ern C heyenne Al lotme nt Act to exte nd in pe rpetuity th e tri ba l owner ­

ship of all reserv ation minerals.

In 1976, the ILS. Supre me Court both recognized, an d appro ved t his 

continuing congressional ove rsight of the miner al lan ds o f the Nor th ­

ern Cheyenne in the No rth ern Che yenn e v. Ilo llowb rea st. We believe 

th at this record of congressional concern for, and int ere st in, the ap ­

prop ria te use and disposition of th e No rth ern Cheyenne miner al estate 

fully supp orts and justifies a presen t exercise of Congres s preserved 

oversigh t au thor ity to correct ad ministrativ e abuses an d excesses t hat 

occurred du rin g the Secre tar y of the In te rior’s ste wa rdship over the 

No rth ern Cheyenne min eral lan ds in the years 1966 to 1971 when the 

coal permits an d leases were fo rm ula ted a nd approve d.

It is ou r belief th at S. 2126 embodies a fa ir and ap pr op riate congressiona l resolution of th is problem. I f enacted , S. 2126 w ould have 

the imm ediate and, we believe, irrevoc able effect of fore closing the 

rea lization of an y coal com pany claim s or remedie s again st th e rese rvation mineral land s. An d we believe th at an elimination of such claim s 

reme dies wou ld not, as a matt er of fac t, change the act ual position 

or leverage of th at company. We think th at each com pany would 

recog nize th at any rig hts to develop coal on the No rth ern Cheyenne 

Reservation a re, in fact, mea ningles s unless enth usias tically s upported 

by the N orthern Cheyenne people as a whole. Ab sen t such su pp ort, any 

such claims of rig ht will not lead to develop ment of the lands.

It is now abso lute ly clear t ha t no such support exists for these t ra nsactions. During the in itial stages of ou r str ug gle ag ain st these tr an sactions, and , indeed, fo r several years the reafter, many gov ernmental 

and indu str y peop le believed t ha t the real purpo se of the trib e’s effort 

was to ex tra ct larg er mo net ary pay me nts fro m the coal companies 

throug h a forced rene gotiation. How ever, for so me tim e now, th at cynical view has been discredite d. It is now recognized th at the tribe has 

acted pu rsua nt to i ts own sense of du ty and hon or, the d uty to prote ct 

and preserve the Nor th ern Cheyenne Re ser vation as a hom elan d for 

the No rth ern Che yenne people, and the tra di tio na l obligation to resist 

with all ava ilable resources the dishonoring attemp ts of outsiders to 

overcome th e w ill of the No rth ern Ch eyenne people.
39

S. 2126 makes no judgment regarding the economic value, nature, 

or extent of the rights of the coal companies under the permits and 

leases. The enactment of S. 2126 would neither enhance nor diminish 

the economic value of any such rights. If enacted, S. 2126 would 

have the directly beneficial effect of causing the Secretary of the 

Interior, for the first time, to forthrig htly consider and determine 

the nature, extent, and value of anv such rights. Without conceding 

their validity, it is our belief tha t if legitimate rights exist, they 

would be limited to no more than a righ t to reimburse out-of-pocket 

expenditures made in reliance on the governmental approvals of 

these transactions. In fact, even such claims may be subject to substantial offset by the value received by the companies through their 

extensive use and enjoyment of the exploration privileges provided 

for in the involved documents. In any event, the enactment of S. 2126 

would precipitate a full and careful secretarial evaluation of these 

and any other legal considerations or defenses applicable to the legal 

position of the companies. Certainly, it is ap propriate tha t the Secretary of the Interior finally confront and recognize his responsibilities to do justice in this matter.

In summary, we believe tha t the approach taken by S. 2T26 represents an equitable resolution to the disputed coal lease situation 

on the Northern Cheyenne Reservation. Therefore, the Northern 

Cheyenne Tribe strongly endorses S. 2126. We support this bill as it 

is currently written and would support any modification of this bill 

which meets the approval of the Senate select committee and which 

would accomplish the same ends. We urge Congress to recognize our 

need and to act upon it.

Mr. Chairman, thank you for your courtesy, attention, and consideration in this matter.

Senator Melcher. Thank you, Allen. I think you have provided 

the committee with the most thorough and comprehensive documentation of this whole sad affair tha t has been provided many times 

from past to present.

We also appreciate the summary and points of law tha t are attached to your statement and which will be made a part of the record 

immediately following your statement. It is very helpful to the 

committee to have the points involved affecting the validity of the 

permits and leases as is provided in that documentation.

You listened to our discussion with the Department of the Interior 

witness and with the representatives of the coal companies this morning, and I think you are aware of exactly where we are. I think we 

seem to have general agreement all the way around tha t settlement will probably depend upon legislation. While the Department 

and the companies do not like S. 2126 as it is drafted, it clearly does 

provide the vehicle for a settlement which both of those entities could 

work with.

We will give a sufficient amount of time for the Department and 

the companies to make a proposal to the committee. Of course, we will 

provide you with their proposal, but I think it is obvious tha t unless 

we can establish some sort of a dollar value tha t is involved, and 

whether tha t is paid out in money or in the form of some sort of bid
40

credits on other Federal coal, we are going to have to be able to make 

a convincing case to Congress that such a procedure is warranted.

If we are not talking about the total value of the coal tha t is involved in the permits and leases involved on the Northern Cheyenne 

Reservation but are talking about actual dollars expended and want to 

make some type of an arrangement for bid credits on tha t basis, I 

think we have something tha t Congress can accept.

There is the point tha t has been made by the representatives of the 

coal companies that there needs to be some consideration, they believe, 

beyond th at, tha t goes to the point of their removing the ir interest in 

the leases and permits from contention. Therefore, settlement would 

not require litigation, which we can all agree would be very extensive and time consuming.

I think it is obvious that my position is that simple trade of coal, 

Federal coal, off the reservation for tha t coal involved on the reservation, involving the Northern Cheyenne Tribe, would not be a procedure 

tha t Congress would look favorably on. I think they would reject it 

out of hand. However, I think Congress would look favorably on some 

sort of procedure that has what has been described by the coal companies as bid credits for other Federal coal. I think there is a possibility of that, and we will relate the determination and the method 

they would like to use that is agreeable to the coal companies and to 

the Department.

Hopefully, we will have that before 30 days has expired, because if 

we are going to pass this bill this year, we have to keep in mind th at 

we have to have prompt action in, first of all, consideration to the Senate, and perhaps a companion bill introduced in the House. I don’t 

know, but either way, we have to clear both bodies, and we have to do 

tha t this summer if we are going to do it in this Congress.

I want to thank you all very much for a very fine presentation.

Mr. Chestnut. Thank you. We also want to file this petition, a 

copy of which was filed with the Secretary, which is just a complete 

record of everything tha t happened from the beginning. We would like 

to make this a part of the record.

Senator Melcher. We will make tha t pa rt of the file.

Mr. Richtman. We already have a copy of tha t on file.

Mr. Chestnut. You already have a copy. Then I will take this 

back to Seattle with me.

Senator Melcher. The committee already has tha t on file, and we 

will make it a part of the file in conjunction with this bill.

[The material submitted by Mr. Rowland follows:]

Summary of Points of Law Affecting th e Validity of Coal P ermits and Leases on the Northern Chey enn e Reservation

(A Memorandum to the Solicitor, Department of Interior, Submitted on Behalf 

of the Northern Cheyenne Tribe by Ziontz, Pirtle, Morisset & Ernstoff, their 

Attorneys)

I. BACKGROUND

This memorandum is submitted pursu ant to the agreement of July 31, 1973. 

between counsel for the Northern Cheyenne Tribe, Alvin J. Ziontz, and representative s of the Solicitor, United States Departm ent of Interio r, concerning 

procedures to be followed with respect to the conflict over the coal leases and 

perm its on the Northern Cheyenne Reservation.
41

On March 5, 1973, the Northern Cheyenne Tribe passed Resolution No. 132 (73) directing that all existing permits and leases for coal exploration and mining on the Reservation be cancelled by the Secretary. In March 1973, the Tribe submitted a petition to the Secretary demanding that the Secretary declare the leases and permits void. On June 6, 1973, Alvin J. Ziontz, of the firm of Ziontz, Pirtle, Morisset & Ernstoff, wrote to the Secretary and requested that no final action be taken on the Tribe’s petition until the firm had had an opportunity to complete its factual and legal investigation of the matter. On July 31, 1973, Alvin J. Ziontz met with Kent Frizzell, Charles Soller, William Moses and David Lundgren to discuss the procedural framework for reaching a decision on the Tribe’s petition. It was agreed that counsel for the Northern Cheyenne Tribe would prepare a memorandum to the Solicitor summarizing the points of law' which they regarded as affecting the validity of the permits and leases; that the memorandum would not attempt to set forth in full the legal grounds and authorities, but would be in summary form only; tha t the memorandum would indicate with respect to each point of law whether counsel viewed it as render­ ing the permit or lease void ab initio, or voidable; and finally, indicating which permits and leases were affected by each legal infirmity. This memorandum is submitted pursuant to tha t agreement.

This memorandum is not intended to constitute a final summary of the Tribe’s position. The right is reserved to bring to the attention of the Secretary any additional grounds which may be discovered in the course of further investiga­ tion or analysis.

The points of law are listed, briefly described, and specified as to legal effect in part II. Their applicability to the particular leases and permits is set out in tabular form in part IV.

II. POINTS OP LAW AFFECTING THE VALIDITY OF THE LEASES AND PERMITS

A. Pre-issuance grou nds: Violations which rendered the permit or lease void ab initio.

1. Failure to perform technical examination.—The cornerstone of 25 CFR part 177 is the technical examination. § 177.4(a). No technical examination was made, and, therefore the mandate of par t 177 was ignored. The required preissuance careful consideration of the broad panoply of tribal cultural, his­ toric, social and environmental interests did not occur. The data required for the performance of every essential Departmental function under the regulation were never developed.

2. Failure to formulate general requirements.—The technical examination data provides the exclusive basis for the formulation of the general requirements required by § 177.4. Under pa rt 177, the general requirements are the most vital provisions of a permit or lease. Yet none were formulated. As a result, the exploration plan and mining plan mechanisms were emasculated, since those mechanisms rely fundamentally on the existence of general requirements. 3. Maladministration of part 177 violated NEPA.—The National Environmen­ tal Policy Act of 1969 made it unlawful for the Federal Government to approve or engage in policies or programs of economic expansion or development of resources without first carefully considering and designing against environmen­ tal degradation. Section 102 of the Act directs tha t “to the fullest extent possible: (1) The policies, regulations, and public laws of the United States shall be interpreted and administered in accordance with the policies” of the Act. This mandate covered the Department of the Inte rior’s administration of par t 177, but was defied.

4. Failure to perform pre-issuance studies required by NEPA.—Section 102 of the National Environmental Policy Act of 1969 required the performance, prior to issuance of a permit or lease, of a documented assessment of environmental impact. No such impact studies were made.

5. Violation of tribal charter provision limiting lease term to 5 years.—The tribal charter (Section 5(b) (3)) limits coal leases to a term of 5 years. The instant leases, in violation of tha t limitation, provide for a term of 10 years and as long thereafter as coal is produced in paying quantities.

6. Violation of tribal charter provision protecting natural resources.—The tribal charter (Section 5( b) (4 )) disallow action by or on behalf of the Tribe which in any way operates to destroy or injure the tribal grazing lands, timber or other natural resources on the Reservation. Leases providing for strip mining are, therefore, not permitted.
42

7. Breach of trust in validates Departmental and Tribal approvals.—Aside from 

the enumerated statutory and regulatory violations, the trustee, in several ways, breached trust responsibilities. Among these defaults were the following: (1) 

The trustee failed to advise the Tribe that the proposed strip mining would have devastating effects on its most vital interests, tha t the proposed activities would wreak cultural, social, and ecological havoc; (2 ) the trustee failed to inform the Tribe about the nature and extent of the coal deposits; (3 ) no advice was given as to the great economic significance of coal with respect to the Nation’s future energy needs; and, (4 ) the Tribe was advised to accept unconscionably 

low economic terms. Under such circumstances, all tribal and Departmental approvals of permits 

and leases were defective and void. The breach of tru st is seen clearly when the Department’s administration, under NEPA and 43 CER 23, of public lands is compared to i ts administration, under NEPA and 25 CFR 177, of Indian lan ds ; there has been a more careful administr ation of the truste e’s lands than the 

ward’s lands.

8. USGS defaulted its obligation to provide technical advice.—Pa rt 177 contemplates that the USGS will provide the required scientific and technical exper­ tise in the performance of the technical examination, formulation of the general requirements, formulation and evaluation of exploration plans and mining plans, the setting of performance bonds, and the monitoring of activities under a permit or lease. P art 171 similarly relies on USGS to furn ish all necessary scientific and technical information. These and related duties are more particularly described in 30 CFR 211 and 30 CFR 231. The USGS did not perform these duties, leaving 

the Tribe technically and scientifically uninformed. Any tribal approval of a 

permit or lease was therefore defective and void.

9. Lease option not authorized by regulations.—The regulation authorizing 

prospecting permits allows only the creation of a preference right to lease. § 1 71. 27(a). There is no authority for the issuance of a permit which includes a right to compel a lease, yet every permit includes a provision purporting to gra nt 

such a right.

10. Lease option effects an unlawful circumvention of Part 177.—Section 177.4 

requires the performance of a technical examination and formulation of general requirements both before issuance of a permit and before issuance of a lease. Assuming t hat a pre-permit technical examination had occurred, under par t 177, it could have served only as a basis for the g ranting of permit rights. Yet all the permits purpor t to grant unqualified lease rights as well. This violates the 

formulation and intent of pa rt 177.

11. Permits cover excessive acreages.—Section 171 .27( a) requires all permits 

granting a preference right to a lease to comply with all laws and regulations applicable to leases. Therefore, the acreage limitation in § 17 1.9(b) applies to the permits. The permit acreages were fa r in excess of th at limitation, without lawful 

basis.

12. Acreage limitation was violated by provision of permit.—Section 171. 9(b) 

limits coal lease acreage to 2,560 acres. That limitation may be exceeded only if the i nterests of the Tribe will be served thereby ; this precondition for exceeding the 2,560 limitation was unlawfully eliminated from paragraph 2 (a ) of the 

permit.

13. Improper administration of the acreage limitation.—In administering the 

acreage limitation, the Department, in violation of S 171 .9(b), did not consider whether allowing excessive acreages would be in the Tribe’s best interests, and considered only whether the coal companies deemed large acreages necessary to 

their purposes.

14. Tract configuration improper.—Section 171.8 and 171. 9(b) set out restrictions as to the configurations of permit and lease tracts. These restric tions were 

violated.

15. Inadequate permit bonds were posted.—By virtue of § 171.27a, the bond 

schedule set out in § 171 .6(a ) applied to permits. The bonds posted fell fa r short of tha t standard. Under § 171.7, the permits should have been disapproved by 

the Department.

16. Inadequate lease bonds were posted.—The posted lease bonds were wholly 

inadequate in amount to protect the interests of the Tribe. Adequate bonds should have been required under the provisions of § 171 .6(a) and § 171.6(c ).

17. Bond regulation violated by provisions of permit and lease.—Under § 177.8, 

it is required that a bond in an amount sufficient to cover the costs of reclamation be posted prior to exploration or mining. The mandatory natur e of this require-
43

ment was unlawfully changed in permit paragraph 2(r) and lease paragraph 

111(10).

IS. Superintendent failed to consult with the Tribe.—Under § 177.12, a super­ intendent must consult with the Tribe in connection with the performance of the 

technical examination and formulation of the general requirements. This was not 

done. Therefore, any tribal and Departmental approvals were defective and void.

19. Surrender regulation violated by lease provision.—Section 171.27(b) sets out the mechanism for surrender of a lease. Surrender is formulated not as a 

right, but as a privilege subject to Secretarial approval. The lease, however, in 

paragraph 111(24) (b) unlawfully converts surrender into a matter of right for 

the lessee. It also unlawfully deletes other conditions enumerated in § 171.27(b).

20. Surrender mechanism renders lease illusory.—Lease paragraph 111(24) (b) purports to endow the lessee with a discretionarj’ right to surrender the lease or 

any part thereof at any time at no penalty. This renders the lease illusory and 

void.

21. The permits and leases arc unconscionable.—The financial provisions of the permits and leases are so grossly inadequate that they are unconscionable. The 

provisions purporting to grant the coal companies rights to strip mine massive 

portions of the Reservation’s total area place in the hands of the coal companies 

the power to extinguish the Northern Cheyenne culture. That is unconscionable. 

A lack of positive preservation and reclamation provisions is unconscionable. The 

permits and leases are, therefore, void.

22. Permits and leases held by unlawful trust.—Federal law and policy (as 

contained, for example, in 30 U.S.C. § 184(k )) provide that mineral permits and 

leases held by an unlawful trus t shall be forfeited. The merger of Peabody Coal 

with Kennecott Copper Corporation was declared unlawful in Kennecott Copper Corporation v. FTC, 467 F. 2d 67 (10th Cir. 1972). Accordingly, all Peabody permits and leases are void.

23. Permits acquired and held for speculative purposes.—Permit paragraph 2(b) prohibits the acquisition of a permit for speculative purposes. Nevertheless, 

permits were acquired for such purposes.

B. Post-issuance grounds: Violations which render the permit or lease voidable.

24. Exploration without an approved exploration plan.—Section 177.6(a) re­ quires the submission and approval of an exploration plan prior to any exploration activities. Nevertheless, exploration was engaged in without any such approved plan.

25. Exploration without an adequate exploration plan.—Pa rt 177 requires that an exploration plan include detailed provisions describing the contemplated exploration, and the surface preservation, conservation and reclamation methods 

to be followed. See §§177.6, 177.8(a), 177.9(b), 177.10(a). No such plans were 

submitted.

26. Exploration with a defectively approved exploration plan.—§§ 177.6(b) and 177.6(c) provide for the evaluation and formulation of the exploration plan 

on the basis of the data from technical examination and the general requirement. 

Since a technical examination was not performed and general requirements were 

not formulated, there could be no valid approval of an exploration plan. Section 

177.12 requires that the Tribe be consulted in connection with the approval of an 

exploration plan. No such consultation occurred, therefore, there could be no 

valid approval.

27. Failure to perform required NEPA study prior to approval of exploration

plan.—Section 102 of the National Environmental Policy Act of 1969 required the 

performance, prior to the approval of an exploration plan, of a documented 

assessment of environmental impact. No such impact studies were made.

28. Operations commenced before receiving written permission from U.S.G.S.—

§ 171.20(b) requires written permission from U.S.G.S. before commencement of 

operations. Operations commenced without receiving such permission.

29. Exploration activities caused unlawful damage to land, improvements and

stock.—Permit paragraph 2(e) sets out the permittee’s obligation to prevent unnecessary damage. This provision was violated.

30. Operations reports not filed.—§§ 177.9(a), 177.9(b), 177.9(d) (1), 30 C.F.R. 

211.6(a), 30 C.F.R. 231.8 and permit paragraph 2(p) require the submission of 

detailed reports on operations under permit or lease. These reports were not 

submitted.

31. Expenditure reports not filed.—§ 171.14(b), Permit paragraph 2(b) and 

Lease paragraph III (6) require regular reporting of expenditures. These reports 

were either not filed or not timely filed.
44

32. Required inspections not made.—§§ 177.9(c) (2), 177 .9(d)(2), 177.10(a), 

30 C.F.R. 211.4, and 30 C.F.R. 231.3 require inspections of operations. These inspections were not performed.

33. Exploration bonds were not posted.—Under § 177.8, it is required that a 

bond in an amount sufficient to cover the cost of reclamation be posted prior to 

exploration. No such bond was posted.

34. Insufficient development expenditures.—Permit paragraph 2(b ) specifies 

mandatory development expenditures. The required expen ditures were not made.

35. Illegal assignments.—§§ 171.26(a), 171.26(b), permit paragraph 2(n) and 

lease paragraph II I (9) prohibit assignment and creatio n of override agreements unless prior Sec reta rial approval is obtained. Assignments were made and 

override agreements entered into in violation of these provisions.

36. Condition on assignments unsatisfied.—-The tribal approval of the assignments from Sentry Royalty to Peabody was expressly conditioned on Kennecott’s 

guarantee of all perm anent and lease obligations. The decision in Kennecott v. 

FTC would app ear to render that condition unsatisfied. Peabody, therefore, can 

claim no righ ts arising from those assignments.

Depa rtm ent op th e I nterior, Off ice of th e Secretary, New s Release— 

J un e 4, 1974

MORTON ANNOUNCES DECISION ON NORTHERN CHEYENNE COAL LANDS

Secretary of the Int erior Rogers C. B. Morton today announced an encompassing decision on th e controversy involving leases and exploratory perm its for coal 

development on the Northern Cheyenne Indian reservatio n in Montana.

The Northern Cheyenne Tribe petitioned the Secretary in Jan uary 1974 to 

withdraw the Departm ent’s approval of leases and exploratory perm its for strip 

mining of coal on about 214,000 acres of the 433,740 acre reservation.

The decision announced by the Secretary today grants the petition in p a rt; 

denies it in p a rt; refers some questions to the Department’s Office of Hearings 

and Appeals; and holds some decisions in abeyance.

As an alte rnative , the decision allows the Tribe to sue the coal companies 

involved with the supp ort of the Secretary on any and all issues, or with the 

support of the Secretary to request the Justice Department to bring suit in the 

name of the Northern Cheyenne again st the coal companies on the issues.

.Secretary Morton said the decision was a necessarily complex resolution of 

the issues presented in the Tribe’s petition.

“Although many of the allegations of in validity were similar, each of the three 

coal sales and e'acli of the leases and perm its involved different circu mstances 

and issues,” he said.

“My decision, therefore, does not gran t or deny the petition as a whole, nor 

can it be the final disposition of all the issues raised by the Tribe. Rather, I 

believe it establish es the essential fram ework for an eventual dete rmin ation 

which will be equitable.”

Various requests by companies holding coal exploratory perm its on the reservation to go to lease on some of these perm its and to renew some p ermits are 

also pending before the Department. The decision announced today also deals 

with these requests.

The t ext of the decision is attached.

Text of Decision on Northern Che ye nn e Peti tio n

I have before me a petition by the Northern Cheyenne Tribe to rescind this 

Departm ent’s approval of various leases and perm its for coal mining on the 

Northern Cheyenne Reservation. Also pending before officials of the Depa rtment 

are various requests by the perm ittees to go to lease on certa in of these permits 

and to renew certain other permits. This decision announces the Departm ent’s 

disposition of the Tribe’s petition and the perm ittees’ requests.

Af te r careful resea rch and consideration it has been determined th a t:

FIRST SALE

Bids were opened on July 13, 1966. On August 19, 1966, a two-year exploration 

permit was grante d to the sole bidder, Peabody Coal Company for 96,829.95 acres. 

On August 13, 1968, a two-year extension was approved for th at permit. On December 30, 1970, I approved six leases consisting of 16,035.05 acres, or 17 percent
46

of the tota l perm itted acreage. The remaining acreage reve rted to its original sta tus pr ior to the explo ration permit.

With respect to lease No. 14-20-2057-897 for 12,946.07 acres, there is no clear evidence that there was an explicit waiver of the limitation provided in 25 CFR § 171.9. Therefore, I direct Peabody Coal Company and the Northern Chey­ enne Tribe to conform this lease to 2,560 acres or less, or clearly to demonstrate the need to waive this limitation .

As to thi s lease, as well as the other five leases, I have determ ined th at the required approval of the Peabody Mining Plan is a significant Fed eral action which would substan tially affect the env ironment; therefore, no furth er admin­ istrative action will be taken until the Department has completed an Environ­ mental Impact Stateme nt and I have made a determination that furth er action should be taken.

All other requests in the petition pertaining to the first sale are hereby denied.

My decision as to this first sale thus grants the Tribe’s petition in pa rt and denies it in part, and holds in abeyance all furth er approvals required by this Department.

SECOND SALE

On December 15, 1969, a two-year exploration permit was granted to the sole bidder, Peabody Coal Company, for 55,398.99 acres. On December 13, 1971, a two- year extension was approved, to become effective on December 15, 1971. On December 3,1973, Peabody Coal Company requested to go to lease on 25,160 acres, approximately 45 percent of the permitted acreage. The remaining acreage re­ verted to its original sta tus prior to the exploration permit. No adm inistrative action will be taken until (1) Peabody Coal and the Tribe modify this request to conform to the acreage lim itation of 25 CFR § 171.9, or clearly to demonstrate the need to waive this lim itation; and (2) until an Environmental Imp act Sta te­ ment h as been completed by the Depa rtment.

Since there is some question as to whether or not a technical exam ination has been done as provided in 25 CFR § 177.4, I am reserving my decision on this question and as an aid to any contin uing investigation of this issue, I am asking the BIA Area Director in Billings to subm it to me w ithin 60 days a full writte n report summ arizing his findings as to each of the sep arate ma tters requ ired to be explored by the regulations.

All other requests in the petition pertain ing to the second sale are hereby denied.

My decision as to the second sale thus gra nts the Tribe’s petition in p art, denies it in part, and holds one issue in abeyance for furth er decision. It denies Pea ­ body's request to go to lease with out prejudice to th at request being modified by Peabody and the Tribe, but provides that final Departm ent actio n on any such request will be held in abeyance until completion of an Environmental Impact Statement.

TH IRD SALE

On May 21, 1971, four bidders were granted two-year exploration perm its on eight tracts consisting of 172,291.89 acres. There was a total of 12 bidders. Leases have been requested on thre e tra cts by one bidder, but as with the second sale leases requested by Peabody, no adm inistrative action will be taken on this re­ quest until it is modified by the perm ittee and the Tribe to conform to the acreage limitatio n provided in 25 CFR § 171.9 or a clea r demonstration of the need to waive this limitation is made. Perm it renewals have been requested for an addi­ tional two years on the five remaining tracts. No action will be taken concerning the request to go to lease or renew als of the perm its until an Environmental Impact Stateme nt is completed.

It has l>een alleged that twro of the successful bidders involving four tra cts violated 25 U.S.C. 396a and 25 CFR § 171.2, § 171.3(a), § 171.5, § 171.7 and S 171.26 (bidding for speculative purposes by unqualified persons) and 25 CFR §171.26 (unlawful assignm ent). I am here with referring these two issues to the Office of Hearings and Appeals for findings of fac t and conclusions of law, with instruction s to determ ine these issues in an expeditious manner. The Solici­ tor's Office will participate in this hearing to represen t the tru st responsibilities of the Department. The Northern Cheyenne Tribe may, if it wishes, be a party to this proceeding.

Since there is also some question as to whether or not a technical exam ination has been done as provided in 25 CFR § 177.4 as to these permits, I am reserving
46

my decision on this question and—as with the second sale perm its—I am asking 

the BIA Area Director in Billings to submit to me with in 60 days a full written 

report summarizing his findings as to each of the sep ara te ma tters required to 

he explored by the regulations.

The Tribe has also claimed th at the permits and leases are invalid because 

there is no adequate bond provided as required by 25 C FR § 171.6 and § 171.8. 

While I do not believe tha t this deficiency merits cancelling my approval of these 

permits, I will ensure that prior to any furth er operations, the perm ittees and 

lessees shall post a bond that is fully adequate to cover the maximum anticipa ted 

costs of reclamation a fte r exploration or mining.

All other requests in the petition pertain ing to the third sale are hereby 

denied.

My decision as to this thir d sale thu s gr ants the Tribe’s petition in part, denies 

it in part, and holds portions of the petition for furth er decision. My decisio* 

denies the request of one perm ittee to go to lease withou t prejudice to th at request being modified by the permittee and the Tribe, and provides th at any 

furth er action by the Department, including permit renewals, will be held in 

abeyance until completion of an Environm ental Impac t Statement.

My decisions herein set out do not preclude the Northern Cheyenne T ribe from 

bringing the ir own law suit aga inst the coal companies to tes t the validity of 

these permits and leases. Alternatively, the Tribe may request the Ju stice D epa rtment under 25 U.S.C. § 175 to bring a sui t in the name of the Northern Cheyenne 

Tribe. I will support them in either request.

As trustee I take cognizance of my responsibility to preserve the environment 

and culture of the Northern Cheyenne T ribe a nd will not subv ert these interests 

to anyone’s desires to develop the na tur al resources on t ha t Reservation.

The Tribe’s petition presents extraord inary circum stances. Among other 

things, the Tribe has expended sub stan tial sums of money in prep aring and 

prese nting the petition to me. The petition charg es th at officials of the Depar tment have violated Departm enta l regulations in approving these perm its and 

leases. Because of many of the unresolved allegation s by the Tribe of Departmental laxity , I have decided tha t, to the fullest extent possible, outside sources 

will be used to prepare the Environmental Imp act Stateme nt or Statements. 

Furtherm ore, the Tribe and the coal companies may be assu red th at the terms 

and conditions upon which mineral development may proceed on the Northern 

Cheyenne Reservation will require their joint agreement and supp ort prior to 

any furth er approval by me. Also, to the fu llest extent perm itted by my st atutory 

auth ority, I will defray the expenses to be subsequently borne by the Tribe for 

atto rne y’s fees and other costs in the adm inistrative proceeding I have directed 

to tak e place and in any litigation it now wishes to commence aga inst the 

companies.

Finally, to better fulfill my futu re trus t responsibility to assu re the protection 

of Indian culture and environmental intere sts as well as to allow maximum development of Indian natur al resources, I have asked the Solicitor to rewrite 

(within 90 days) the present parts 171 and 177 of Title 25, CFR to c orre ct the ir 

present ambiguities. 1 have directed th e BIA to adhere strictly to the implem entation of its regulations.

Senator Melcher. The hearing is adjourned.

[Whereupon, at 12:45 p.m., the hearing was adjourned.]

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