[Federal Register Volume 63, Number 14 (Thursday, January 22, 1998)]
[Proposed Rules]
[Pages 3289-3296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1409]


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DEPARTMENT OF THE INTERIOR

Bureau of Indian Affairs

25 CFR Part 291

RIN 1076-AD87


Class III Gaming Procedures

AGENCY: Bureau of Indian Affairs, Interior.

ACTION: Proposed rule.

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SUMMARY: The Department has concluded that it has the authority to 
prescribe procedures permitting Class III gaming when a State 
interposes its immunity from suit by an Indian Tribe. The proposed rule 
announces the Department's determination that the Secretary may 
promulgate Class III gaming procedures under certain specified 
circumstances. It also sets forth the process and standards pursuant to 
which any procedures would be adopted.

DATES: Written comments must be submitted on or before April 22, 1998 
to be considered.

ADDRESSES: Mail comments to Paula L. Hart, Indian Gaming Management 
Staff, Bureau of Indian Affairs (BIA), Department of the Interior, MS 
2070-MIB, 1849 C Street, NW, Washington, DC 20240. Comments may be 
hand-delivered to the same address from 9:00 a.m. to 4:00 p.m. Monday 
through Friday or sent by facsimile to (202) 273-3153. Comments will be 
made available for public inspection at this address from 9:00 a.m. to 
4:00 p.m. Monday through Friday beginning approximately two weeks after 
publication of the proposed rule.

FOR FURTHER INFORMATION CONTACT: Paula L. Hart, Indian Gaming 
Management Staff, Bureau of Indian Affairs, Department of the Interior, 
MS 2070-MIB, 1849 C Street, NW, Washington, DC 20240, Telephone (202) 
219-4066.

SUPPLEMENTARY INFORMATION:

Introduction

    Congress enacted the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. 
2701-2721, to provide a statutory basis for the operation and 
regulation of Indian gaming and to protect Indian gaming as a means of 
generating revenue for tribal governments. Prior to the enactment of 
IGRA, states generally were precluded from any regulation of gaming on 
Indian reservations. See California v. Cabazon Band of Mission Indians, 
480 U.S. 202 (1987). IGRA, by offering States an opportunity to 
participate with Indian Tribes in developing regulations for Indian 
gaming, ``extends to States a power withheld from them by the 
Constitution.'' Seminole Tribe of Florida v. State of Florida, 116 S. 
Ct. 1114, 1124 (1996).
    Since IGRA's passage in 1988, more than 150 compacts in more than 
20 States have been successfully negotiated by Tribes and States, and 
approved by the Secretary. Today, Indian gaming generates significant 
revenue for Indian Tribes. As required by IGRA, gaming revenues are 
being devoted primarily to providing essential government services such 
as roads, schools, and hospitals, as well as economic development.
    IGRA divides Indian gaming into three categories. This proposed 
rule addresses only the conduct of Class III

[[Page 3290]]

gaming, which primarily includes slot machines, casino games, banking 
card games, dog racing, horse racing, and lotteries. 25 U.S.C. 2703(8); 
25 CFR Sec. 502.4. Under IGRA, the conduct of ``Class III gaming 
activities'' is lawful on Indian lands only if such activities (1) are 
authorized by an ordinance adopted by the governing body of the Tribe 
and approved by the Chairman of the National Indian Gaming Commission 
(NIGC), (2) are located in a State that permits such gaming for any 
purpose by any person, organization, or entity, and (3) are conducted 
in conformance with a Tribal-State compact. 25 U.S.C. 2710(d)(1)(B). 
The proposed regulations which follow relate primarily to this third 
requirement, i.e., the Tribal-State compact.
    Under IGRA, a Tribe interested in operating Class III gaming 
initiates the compacting process by requesting the State to enter into 
negotiations. 25 U.S.C. 2710(d)(3)(A). Upon receiving such a request, 
the State is obliged ``to negotiate with the Indian Tribe in good faith 
to enter into such a compact.'' Id. If the State fails to negotiate in 
good faith, the Tribe may initiate an action against the State in 
Federal district court. 25 U.S.C. 2710(d)(7)(A)(I). If the court finds 
that the State has failed to negotiate in good faith, it must order the 
State and the Tribe to conclude a compact within 60 days. 25 U.S.C. 
2710(d)(7)(B)(iii). If the State and Tribe fail to conclude a compact 
within that period, each side must submit their last best offer to a 
court-appointed mediator, who selects one of the proposals. 25 U.S.C. 
2710(d)(7)(B)(iv). If the State consents to that proposal, it is 
treated as a Tribal-State compact. 25 U.S.C. 2710(d)(7)(B)(vi). If the 
State does not consent, the Secretary of the Interior shall prescribe 
procedures (1) which are consistent with the proposed compact selected 
by the mediator, the provisions of IGRA, and the relevant provisions of 
State laws, and (2) under which Class III gaming may be conducted on 
the Indian lands over which the Indian Tribe has jurisdiction. 25 
U.S.C. 2710(d)(7)(B)(vii).
    In Seminole Tribe of Florida v. Florida, the Supreme Court held 
that a State may assert an Eleventh Amendment immunity defense to avoid 
a lawsuit brought by a Tribe alleging that the State did not negotiate 
in good faith. After the Seminole decision, some States have signaled 
their intention to assert immunity to suit in Federal court. Claiming 
immunity will, if no further action is taken, create an effective State 
veto over IGRA's dispute resolution system and therefore will stalemate 
the compacting process. The proposed rulemaking contemplates that the 
Secretary would prescribe Class III gaming procedures to end the 
stalemate.

Secretarial Authority to Prescribe Procedures

    On May 10, 1996, the BIA published an ``Advance Notice of Proposed 
Rulemaking'' (hereafter, ANPR) in response to the United States Supreme 
Court's decision in Seminole Tribe of Florida v. State of Florida, 116 
S. Ct. 1114 (1996). 61 FR 21394 (May 10, 1996). In that ANPR, the 
Department posed, among others, the question of ``[w]hether and under 
what circumstances, the Secretary of the Interior is empowered to 
prescribe `procedures' for the conduct of Class III gaming when a State 
interposes an Eleventh Amendment defense to an action pursuant to 25 
U.S.C. 2710(d)(7)(B).'' The Secretary of the Interior, in consultation 
with the Solicitor, has determined that he possesses legal authority to 
promulgate procedures setting out the terms under which Class III 
gaming may take place when a State asserts its immunity from suit.
    The Secretary's authority arises from the statutory delegation of 
powers contained in 25 U.S.C. 2710 (d)(7)(B)(vii) of IGRA and 25 U.S.C. 
2 and 9. As the Eleventh Circuit Court of Appeals explained, in the 
case where the Supreme Court ultimately found the States could assert 
Eleventh amendment immunity:

    We are left with the question as to what procedure is left for 
an Indian Tribe faced with a State that not only will not negotiate 
in good faith, but also will not consent to suit. The answer, 
gleaned from the statute, is simple. One hundred and eighty days 
after the Tribe first requests negotiations with the State, the 
Tribe may file suit in district court. If the State pleads an 
Eleventh Amendment defense, the suit is dismissed, and the Tribe 
pursuant to 25 U.S.C. Sec. 2710(d)(7)(B)(vii), then may notify the 
Secretary of the Interior of the Tribe's failure to negotiate a 
compact with the State. The Secretary may then prescribe regulations 
governing Class III gaming on the Tribe's lands. This solution 
conforms with IGRA and serves to achieve Congress' goals, as 
delineated in Secs. 2701-02.

Seminole Tribe of Florida v. State of Florida, 11 F.3d 1016, 1029 (11th 
Cir. 1994) (dictum), aff'd on other grounds, 116 S.Ct. 1114 (1996).
    Although Congress likely did not foresee the States' refusal to 
participate in the court-ordered mediation process, it plainly 
authorized the Secretary to permit Class III gaming in the event that 
the court-supervised process failed to produce a joint compact. The 
power of an agency to administer a congressional mandate like this one 
is not restricted to circumstances explicitly described by Congress; 
the agency's power also extends to circumstances that Congress, for a 
variety of reasons, may not have anticipated or articulated in the 
statute. When Congress has not ``directly spoken to the precise 
question at issue,'' courts ``must sustain the Secretary's approach so 
long as it is based on a reasonable construction of the statute.'' Auer 
v. Robbins, 117 S.Ct. 905, 909 (1997), quoting Chevron U.S.A., Inc. v. 
Natural Resources Defense Council, 467 U.S. 837, 842-43 (1984); Morton 
v. Ruiz, 415 U.S. 199 (1974); Kenneth Culp Davis & Richard J. Pierce 
Jr., Administrative Law Treatise Sec. 3.3 (3d ed. 1994). As explained 
in the proposed rule, the Secretary will provide procedures only when a 
State has successfully asserted its immunity from an Indian Tribe's 
good faith lawsuit. Moreover, the proposed rule generally mirrors the 
mediation scheme provided in IGRA to the maximum practicable extent.
    Along with the specific authority under section 2701(d)(7)(B)(vii), 
Congress has delegated to the Executive under 25 U.S.C. 2 and 9 broad 
authority to issue regulations necessary to manage Indian affairs and 
carry into effect legislation relating to such affairs. <SUP>1</SUP> 
The courts on many occasions have upheld the exercise of this 
authority. In Washington v. Washington State Commercial Passenger 
Fishing Vessel Association, 443 U.S. 658, 691 (1979), for example, the 
Court noted with approval regulations protective of off-reservation 
Indian fishing rights. Although there was no explicit delegation of 
authority to adopt fishing regulations in the Treaty reserving the 
right, the Supreme Court recognized that the Secretary's ``general 
Indian powers'' embodied in 25 U.S.C. 2 and 9 gave him the authority to 
adopt regulations over Indian affairs. See also United States v. 
Eberhardt, 789 F.2d 1354, 1360-61 (9th Cir. 1986); Parravano v. Masten, 
70 F.3d 539 (9th Cir. 1995), cert. denied, __ U.S. __, 116 S. Ct. 2546 
(1996); United States v. Michigan, 623 F.2d 448, 450 (6th Cir. 1980); 
James v. U.S. Dep't. of Health and Human Services, 824 F.2d 1132, 1137 
(D.C. Cir. 1987). Such cases fully support the exercise of Secretarial

[[Page 3291]]

authority to promulgate regulations governing and protecting Indian 
rights, such as the right to engage in gaming activities, that are 
rooted in Federal law.
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    \1\ ``The Commissioner of Indian Affairs shall, under the 
direction of the Secretary of the Interior, and agreeably to such 
regulations as the President may prescribe, have the management of 
all Indian affairs and all matters arising out of Indian 
relations.'' 25 U.S.C. 2.'' The President may prescribe such 
regulations as he may think fit for carrying into effect the various 
provisions of any act relating to Indian affairs, and for the 
settlement of the accounts of Indian affairs.'' 25 U.S.C. 9; see 
also 43 U.S.C. 1457 (charging Secretary of Interior with 
administration of ``public business'' related to Indians).
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    In comments on the ANPR, some States have suggested that the 
Supreme Court's decision in Organized Village of Kake v. Egan, 369 U.S. 
60 (1962), may preclude the Secretary's exercise of rule-making 
authority for gaming procedures. See Comments of Florida, et al., 
supra, at 9. In Organized Village of Kake, the Secretary purported to 
authorize off-reservation fisheries in Alaska pursuant to his general 
authority over Indian affairs and the White Act, 48 U.S.C. 221-228. 
However, no treaty, executive order, statute, or Federal common law 
established tribal fishing rights. Accordingly, the Court struck down 
the Secretary's regulations authorizing the use of fish traps in 
violation of State law because the Tribe had no ``fishing rights 
derived from Federal laws.'' Id. at 76. See McClanahan v. Arizona State 
Tax Com'n., 411 U.S. 164, 176 n.15 (1973) (distinguishing Organized 
Village of Kake as limited to situations involving non-reservation 
Indians without Federally-protected rights); see also Clinton, et al., 
American Indian Law at 593 (3d ed. 1991).
    Here, in contrast, the Tribes' Federal common law right to engage 
in gaming activities free of most State regulation on Indian land was 
recognized in California v. Cabazon Band of Mission Indians, 480 U.S. 
202 (1987) and pre-existed adoption of IGRA. Because tribal gaming 
rights are rooted in Federal law, 25 U.S.C. 2 and 9 give the Secretary 
the authority to adopt regulations to carry into effect those rights.
    The Ninth Circuit, in a case vacated after the Supreme Court's 
decision in Seminole, expressed concern that the Secretary would 
undermine congressional intent if he imposed regulations for Class III 
gaming when a State asserted immunity. Spokane Tribe of Indians v. 
Washington, 28 F.3d. 991, 997 (9th Cir. 1994) (dictum), vacated and 
remanded, ____ U.S. ____, 116 S. Ct. 1410 (1996). The court relied on 
the provision in IGRA that the Secretary act only after a State is 
provided the opportunity to participate in negotiations and 
mediation.<SUP>2</SUP>
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    \2\ The Supreme Court in Seminole did not resolve the Ninth and 
Eleventh Circuits' conflicting dicta, stating, ``[w]e do not 
consider, and express no opinion upon, that portion of the position 
of the decision below that provides a substitute remedy for a Tribe 
bringing suit. See 11 F.3d 1016, 1029 (C.A. 11)(case below).'' 116 
S. Ct. at 1133 n.18.
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    In our view, Congress had at least three purposes in enacting IGRA: 
to recognize and give a statutory structure for gaming as a means of 
promoting tribal economic development, self sufficiency and strong 
tribal government; to provide a basis for regulating Indian gaming to 
ensure that it is conducted fairly and that the Indian Tribe is the 
primary beneficiary of the activity; and finally, to afford an 
opportunity for States to participate in the establishment and conduct 
of Indian gaming through Tribal-State compacts, but also to make a 
Federal backstop available should a consensual Tribal-State compact not 
be reached. If the Secretary were unable to issue procedures to permit 
gaming when a State refused to submit to a Federal court the issue of 
whether it was bargaining in good faith, that State would effectively 
be awarded a veto over all Class III Indian gaming within its borders. 
Congress did not contemplate or authorize such a State veto in IGRA.
    The proposed rules are faithful to Congress' intent that States be 
able to participate in the establishment and regulation of Class III 
gaming, through negotiation and mediation, and that Indian gaming will 
be protected from the influence of organized crime. Thus, contrary to 
the concern expressed by the Ninth Circuit, the approach of the 
proposed regulations is not to undermine congressional intent; instead, 
the regulations provide the tools necessary to fulfill congressional 
intent in the wake of Seminole.<SUP>3</SUP>
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    \3\ Twenty-two States filed joint comments on the ANPR 
indicating their ``view that the Court in Seminole did not 
invalidate any portion of IGRA, but that it left the Act intact. The 
decision merely revitalized a jurisdictional defense of the States. 
If a State consents to suit in Federal court, then the complete 
remedial scheme envisioned by Congress can be played out.'' Comments 
of Florida, et al., at 8 (June 28, 1996). We agree that no part of 
the statute need be invalidated, or ``severed'' from the statute. We 
note that IGRA does, however, contain a severability provision, 25 
U.S.C. 2721. See generally Alaska Airlines v. Brock, 480 U.S. 678, 
686 (1987).
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    Faced with the ``problem of defining the bounds of its regulatory 
authority, an agency may appropriately look to the * * * underlying 
policies of its statutory grants of authority.'' United States v. 
Riverside Bayview Homes, Inc., 474 U.S. 121, 132 (1985). In this case, 
IGRA's underlying policies strongly support the issuance of the 
proposed rule. In addition, it is a well-settled principle of Indian 
law that Indian affairs statutes be construed where possible to benefit 
Tribes, not in a way that results in the backhanded deprivation of 
tribal rights. Bryan v. Itasca County, 426 U.S. 373, 379 (1976); C. 
Wilkinson, American Indians, Time, and the Law 46-52 (1987). For these 
reasons, the Secretary concludes that he has the authority to prescribe 
the following rule.
    The Department invites comment on the legal analysis set forth 
above and in the other sections of this document.

Summary of the Proposed Rule

    The proposed rule tracks IGRA's negotiation and mediation process, 
adjusted only to the extent necessary to reflect the unavailability of 
tribal access to Federal court where a State refuses to waive sovereign 
immunity. The proposed rule applies only where a Tribe asserts that a 
State is not negotiating in good faith, files suit against the State in 
Federal court in accordance with IGRA, but cannot proceed in Federal 
court because the State refuses to waive its sovereign immunity from 
suit. In cases in which a State chooses not to assert a sovereign 
immunity defense, these proposed rules would not apply. Instead, the 
negotiation and mediation process set forth in Section 2710(d)(7) of 
IGRA would continue under the supervision of the court.
    In those cases in which a State interposes a sovereign immunity 
defense to a tribal lawsuit in Federal court, the proposed regulations 
establish a process for obtaining State participation in the compacting 
process, prior to the Secretary's identification of procedures. It is 
important to emphasize that, under the proposed rules, the Secretary 
will not adopt procedures in any specific situation unless he first 
determines that the State has failed to bargain in good faith. The 
Department expects that, in most cases, this will require addressing 
the applicable scope of gaming under State law and IGRA. Scope of 
gaming is discussed further below.
    The steps set forth in the proposed rule include:

    1. Following dismissal on grounds of sovereign immunity of a 
Tribe's suit brought pursuant to 25 U.S.C. 2710(d)(7) against a 
State, the Tribe would have the opportunity to submit a request to 
the Department to establish gaming procedures. The procedures 
submitted by the Tribe would be required to address all of the 
issues identified in the proposed rule, including the scope of the 
gaming activities being requested by the Tribe; the Tribe's position 
regarding whether the State has negotiated with the Tribe in good 
faith within the meaning of IGRA; and detailed mechanisms for 
regulation of the gaming, including assurances that games will be 
conducted fairly and that the financial integrity of the entire 
operation will be safeguarded. Because the good faith bargaining 
issue often turns on the question of the appropriate scope of 
gaming, the Tribe will be asked to provide a legal analysis

[[Page 3292]]

supporting the proposed scope of gaming in view of State 
prohibitions and other policies on specific types of gaming.
    2. The Department would notify the Tribe within 15 days that it 
has received the proposal and whether it is complete. Within 30 days 
the Department will notify the Tribe whether it is eligible for 
procedures. The Department will not make a determination of the 
``good faith'' issue at this point.
    3. Following issuance of a notice of completeness and 
eligibility, the Department will notify the State of the Tribe's 
request for the issuance of procedures, and solicit the State's 
comments on the Tribe's proposed procedures, including any comments 
on the proposed scope of gaming. The State also will be asked to 
comment on the Tribe's statements regarding whether the State has 
negotiated in good faith within the meaning of IGRA, particularly on 
the scope of gaming issue. The State will also be invited to submit 
alternative proposed procedures. The State will have 60 days to 
respond.
    4. Based on its review of the submissions of the Tribe and the 
State, the Department shall make a determination whether the State 
is negotiating in good faith with the Tribe. If the Department 
determines that the State is not negotiating in good faith, and the 
State has not submitted an alternative proposal, the Department will 
advise the State and Indian Tribe of: (a) its approval of the 
Tribe's proposal; (b) its rejection of the Tribe's proposal because 
of its failure to meet the substantive standards in the regulation, 
Sec. 291.8; or (c) its convening of an informal conference with the 
State and Tribe within 30 days for the purpose of resolving any 
areas of disagreement.
    5. Alternatively, if the State submits objections to the Indian 
Tribe's proposal and offers alternative proposed procedures, the 
Tribe must file objections to the State's proposal within 60 days. 
If the Tribe does not submit objections to the proposed procedures, 
the Secretary will adopt the State's proposed procedures unless they 
do not meet the substantive standards in the regulations, 
Sec. 291.8.
    6. If the Indian Tribe objects to the State's proposed 
procedures, the Secretary will appoint a mediator who will receive 
``last best offers'' from the State and Tribe. The mediator must 
then submit to the Secretary the proposed procedures that best 
comport with applicable Federal and State law. Within 60 days of 
receipt of the mediator's recommendation, the Secretary must notify 
the State and Tribe of his decision to approve or disapprove the 
procedures submitted by the mediator, or prescribe such procedures 
as he determines appropriate that are consistent with State law and 
the provisions of IGRA.

The Johnson Act and IGRA's Criminal Provision

    The Secretary has also considered the application of criminal 
prohibitions found in IGRA and the Johnson Act and has concluded that 
those prohibitions would not apply upon the adoption of ``procedures'' 
pursuant to these proposed regulations. The Johnson Act and section 23 
of IGRA make most Class III gaming in Indian country illegal unless 
conducted pursuant to an approved compact that is ``in effect.'' 
<SUP>4</SUP> In comments on the ANPR, some States argue that these 
criminal statutes are applicable unless there is a compact that: (1) 
has been voluntarily entered into by a State and an Indian Tribe, 25 
U.S.C. 2710(d)(8)(A); and (2) is ``in effect'' within the meaning of 
IGRA by virtue of having been approved by the Secretary and published 
in the Federal Register. 25 U.S.C. 2710(d)(3)(B). See Comments of 
Arizona at 18-20; Comments of Florida at 10.
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    \4\ The Johnson Act makes it ``unlawful to manufacture, 
recondition, repair, sell, transport, possess, or use any gambling 
device * * * within Indian country as defined in 1151 of Title 
18[.]'' 15 U.S.C. 1175. It does not apply when there is a Tribal-
State compact ``in effect.'' 25 U.S.C. 2710(d)(6). Section 23 of 
IGRA provides that:
    (a) Subject to subsection (c), for purposes of Federal law, all 
State laws pertaining to the licensing, regulation, or prohibition 
of gambling, including but not limited to criminal sanctions 
applicable thereto, shall apply in Indian country in the same manner 
and to the same extent as such laws apply elsewhere in the State.
    *   *   *   *   *
    For the purpose of this section, the term gambling does not 
include:
    *   *   *   *   *
    (2) Class III gaming conducted under a Tribal-State compact 
approved under 11(d)(8) of the IGRA that is in effect. codified at 
18 U.S.C. 1166 (emphasis added).
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    That reading of IGRA is inconsistent with the statute when read as 
a whole, and must therefore be rejected. The Supreme Court has long 
recognized that: ``[i]t is a fundamental canon of statutory 
construction that the words of a statute must be read in their context 
and with a view to their place in the overall statutory scheme.'' Davis 
v. Michigan Dept. of Treasury, 489 U.S. 803, 809 (1989); see also King 
v. St. Vincent's Hospital, 502 U.S. 215, 221 n.10 (1991) (``in 
construing statute [sic] court should adopt sense of words which best 
harmonizes with context and promotes policy and objectives of 
legislature,'' paraphrasing United States v. Hartwell, 73 U.S. (6 
Wall.) 385, 398 (1868)). Most importantly, statutes must be read to 
give effect to every provision. Rake v. Wade, 508 U.S. 464, 471 (1994).
    The States' construction would render the section of IGRA 
authorizing the Secretary to establish ``procedures'' for Class III 
gaming meaningless, because thus woodenly read, no compact can be ``in 
effect'' absent a State's agreement to it. See 25 U.S.C. 2710(d)(3)(B) 
(compact entered into by Tribe and State ``shall take effect only when 
notice of approval of such compact has been published by the Secretary 
in the Federal Register''). Thus, even if the Supreme Court had not 
decided Seminole as it did, under Florida and Arizona's reading of the 
statute, Class III gaming would remain unlawful even if procedures were 
set in place by the Secretary after completion of the judicially-
supervised mediation process.
    Put another way, if the statute is read with such extreme 
literalness it has a technical flaw. It provides for Secretarial 
procedures in the event that States and Indian Tribes cannot agree to a 
compact. If they can agree, such a compact becomes ``in effect'' upon 
approval by Secretary. 25 U.S.C. 2710(d)(3)(B). Where a State does not 
assert immunity from suit and procedures ultimately are adopted by the 
Secretary without State consent, IGRA does not call this a compact ``in 
effect.'' Compare 25 U.S.C. 2710(d)(7)(B)(vii), with 25 U.S.C. 
2710(d)(3)(B). Yet there is nothing else in the statute or its 
legislative history that even hints that the Johnson Act or Sec. 23 of 
IGRA would criminalize Class III Indian gaming in such circumstances. 
If Florida and Arizona's construction were accepted, it would negate 
the entire part of IGRA that calls for mediation and Secretarial 
procedures.
    To avoid such an absurd result, the statute must be read to mean 
that all Secretarial-sanctioned gaming is exempt from the provisions of 
the Johnson Act and section 23 of IGRA. The ``procedures'' adopted by 
the Secretary--whether pursuant to the judicially-supervised mode 
prescribed by IGRA or pursuant to this rulemaking--are properly viewed 
as a full substitute for the compact that would be ``in effect'' if a 
voluntary agreement had been reached, and thus qualify for the 
exemption to the criminal prohibitions on gaming.

Scope of Gaming

    The most frequently contested issue among Tribes and States relates 
to the ``scope of gaming'' permitted under State law, for this is 
important in determining whether particular games are properly the 
subject of negotiation between a Tribe and a State. In the context of 
this proposed rulemaking, the issue bears directly upon whether a State 
is bargaining in good faith with a Tribe and whether a Tribe's 
requested procedures include games lawful under IGRA. 25 U.S.C. 
2710(d)(1)(B). In evaluating the permissible ``scope of gaming'' under 
the various States'' laws, the Department will apply the interpretation 
set forth as the position of the United States on the scope of gaming 
issue in its amicus curiae brief in the Supreme Court in Rumsey Indian 
Rancheria of Wintun Indians v. Wilson, 64 F.3d 1250 (9th Cir. 1995), as

[[Page 3293]]

modified on denial of petition for rehearing, 99 F.3d 321 (9th Cir. 
1996), cert. denied, sub nom. Sycuan Band of Mission Indians v. Wilson, 
No. 96-1059, 65 U.S.L.W. 3855 (June 24, 1997). Copies of the brief are 
available to any reviewer upon request.
    As a threshold matter, the Secretary would disapprove proposals 
when ``contemplated gaming activities are not permitted in the State 
for any purpose by any person, organization, or entity.'' Proposed 25 
CFR Sec. 291.8(b)(3), infra. This conclusion is based on 25 U.S.C. 
2710(d)(1)(B), which states that ``Class III gaming activities shall be 
lawful on Indian lands only if such activities are * * * located in a 
State that permits such gaming for any purpose by any person, 
organization or entity.'' IGRA thus makes it unlawful for Tribes to 
operate particular Class III games that State law completely and 
affirmatively prohibits. Courts have determined that a State therefore 
has no duty to negotiate with respect to such games. See Rumsey Indian 
Rancheria, supra. In other words, if a State prohibits an entire class 
of traditional games, it need not negotiate over the particular games 
within that category. Consequently, such gaming would not be permitted 
under Secretarial procedures.
    Our interpretation of the scope of gaming issues is adopted from 
the United States' amicus brief filed in the Supreme Court in Rumsey 
Indian Rancheria, supra:

    In some circumstances, a question may arise concerning whether a 
State law prohibits a distinct form of gaming or instead regulates 
the manner in which a permitted form of gaming may be played. 
Several hypothetical examples may illustrate the point. If State law 
prohibits five-card stud poker but permits seven-card draw poker (or 
prohibits parimutuel wagering on dog racing, but not on horse 
racing), a question could arise as to whether that State law 
prohibits a distinct form of gaming known as ``five card stud 
poker'' (``or dog racing''), or instead regulates the manner in 
which the permitted form of gaming known as ``poker'' (``or animal 
racing'') may be conducted. If characterized in the former way, the 
State would have to negotiate concerning only seven-card draw poker 
(or horse racing); if characterized in the latter way, the State 
would have to negotiate over all poker games (or all animal racing). 
The relevant question in such a case would be whether, in light of 
traditional understandings and the text and legislative history of 
IGRA, the State has reasonably characterized the relevant State laws 
as completely prohibiting a distinct form of gaming. If the State 
has not reasonably so characterized its laws, it would have a duty 
to negotiate with respect to the gaming.

United States' Brief at 15.
    It is impractical for the Department to attempt to evaluate, in 
advance of a tribal request, the permissible scope of gaming in each 
State. For that reason the proposed rule requires a Tribe to submit its 
own analysis along with its request for Secretarial procedures, and 
goes on to invite the views and active participation of the affected 
State with respect to the applicable scope of gaming under any 
Secretarial procedures.

Monitoring

    Many voluntarily negotiated compacts include a monitoring role for 
the affected State. In these compacts States often assist in background 
checks on key casino personnel, and/or monitor tribal financial 
statements. Tribes may make certain financial information available to 
States to ensure that applicable regulatory requirements have been 
satisfied. Because of the importance of this monitoring function, the 
proposed regulations invite State participation in the promulgation of 
Secretarial procedures, notwithstanding a State's assertion of immunity 
from suit. If a State declines to participate in such an activity, the 
Department believes steps ought to be taken to ensure that independent 
monitoring and enforcement exists. The proposed rule requires that the 
Tribe provide in its procedures for monitoring and enforcement by an 
independent and autonomous tribal regulatory commission. Further, the 
Department seeks comments on whether the NIGC or some other entity 
should perform monitoring and enforcement functions, and, if so, who 
should bear the cost of such functions.
    Publication of this proposed rule by the Department provides the 
public an opportunity to participate in the rulemaking process. 
Interested persons may submit written comments to the location 
identified in the ADDRESSES section of this proposed rule.

Executive Order 12988

    The Department has certified to the Office of Management and Budget 
(OMB) that these proposed regulations meet the applicable standards 
provided in Sections (3)(a) and 3(b)(2) of Executive Order 12988.

Executive Order 12866

    This is a significant rule under Executive Order 12866 and has been 
reviewed by OMB.

Regulatory Flexibility Act

    We do not believe that this proposed rule will have a significant 
economic impact on a substantial number of small entities under the 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq. The Regulatory 
Flexibility Act of 1980 requires preparation of flexibility analyses 
for rules that will have a significant effect on a substantial number 
of small entities, which include small businesses, organizations or 
governmental jurisdictions. At this time, we do not know whether any 
Secretarial procedures, authorized by this proposed rule, will need to 
be adopted. We also do not know whether the adoption of procedures in a 
given case will have a significant impact on small entities as defined 
by the Act. If procedures are proposed pursuant to this rule, States 
(and through the States, local jurisdictions and small entities) will 
be permitted to comment on a given proposal, and any concerns may be 
taken into account in Secretarial procedures.
    It is our preliminary view that Indian tribes are not small 
entities within the meaning of the Regulatory Flexibility Act. The 
statutory definition specifically enumerates several kinds of 
governmental entities, but does not include Indian tribes. 5 U.S.C. 
601(5). This indicates that tribes should not be considered small 
entities. We invite comment on this issue.

Executive Order 12630

    The Department has determined that this proposed rule does not have 
significant ``takings'' implications. The proposed rule does not 
pertain to ``taking'' of private property interests, nor does it impact 
private property.

Executive Order 12612

    The Department has determined that this proposed rule does not have 
significant Federalism effects.
    As explained above, the Secretary has determined that he has the 
statutory authority to adopt procedures to permit Indian gaming in 
appropriate circumstances. Secretarial authority was expressly provided 
in IGRA with respect to the judicially-supervised mediation scheme. It 
would be exercised under the proposed rules in a manner consistent with 
the statutory directive and congressional intent. The proposed rule 
provides the opportunity for States to voluntarily participate in a 
mediation process under the auspices of the Secretary of the Interior. 
As the Supreme Court noted in Seminole, Congress may, under the 
Constitution, choose to withhold from States any authority over Indian 
gaming. Because under the proposed rules the Secretary would be 
tracking the scheme set forth by Congress, and because the proposed 
rule would afford the States as much

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opportunity to participate as where it does not claim immunity from 
suit, we believe the proposed rule has no significant Federalism 
effects.

NEPA Statement

    The Department has determined that this proposed rule does not 
constitute a major Federal action significantly affecting the quality 
of the human environment and that no detailed statement is required 
pursuant to the National Environmental Policy Act of 1969.

Paperwork Reduction Act of 1995

    Sections 291.4, 291.10, 291.12, and 291.15 contain information 
collection requirements. As required by the Paperwork Reduction Act of 
1995 (44 U.S.C. 3507(d)), the Department has submitted a copy of these 
sections to the Office of Management and Budget (OMB) for its review.
    Collection of Information: When a Tribe and State do not 
successfully negotiate a Tribal-State compact, the Tribe will be 
required to collect information to document the negotiation process, 
and prepare proposed procedures for submission to the Secretary. The 
information requested will be unique for each Tribe and may be changed 
when necessary to fit the needs of the Tribe.
    All information is to be collected upon the submission of a request 
by a Tribe for Class III gaming procedures. The annual reporting and 
record keeping burden for the collection of information is estimated to 
average 1,000 hours for each response and we estimate there will be 
approximately 25 respondents. The collection will include time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
information. The total annual burden is estimated to be 25,000 hours.
    Organizations and individuals desiring to submit comments on the 
information collection requirement should direct them to the Office of 
Information and Regulatory Affairs, OMB, Room 10202, New Executive 
Office Building, Washington, DC 20503, Attn: Desk Officer for the 
Department of the Interior.
    The Department considers comments by the public on this proposed 
collection of information in:
    Evaluating whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Department, including whether the information will have practical 
utility;
    Evaluating the accuracy of the Department's estimate of the burden 
of the proposed collection of information, including the validity of 
the methodology and assumptions used;
    Enhancing the quality, usefulness, and clarity of the information 
to be collected; and
    Minimizing the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other collection techniques or other forms 
of information technology.
    OMB is required to make a decision between 30 and 60 days after 
publication of this document in the Federal Register. Therefore, a 
comment to the OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the BIA on the proposed 
regulations.

Unfunded Mandates Act of 1995

    This regulation imposes no unfunded mandates on any governmental or 
private entity and is in compliance with the provisions of the Unfunded 
Mandates Act of 1995.

Drafting Information

    The primary author of this proposed rule is George Skibine, Acting 
Deputy Associate Solicitor, Division of Indian Affairs, Office of the 
Solicitor.

List of Subjects in 25 CFR Part 291

    Indians--Gaming.

    For the reasons given in the preamble, the Department of the 
Interior proposes to establish a new Part 291 of Title 25, Chapter 1 of 
the Code of Federal Regulations as set forth below.

PART 291--CLASS III GAMING PROCEDURES

Sec.
291.1  Purpose and scope.
291.2  Definitions.
291.3  When may an Indian Tribe ask the Secretary to issue Class III 
gaming procedures?
291.4  What must a proposal requesting Class III gaming procedures 
contain?
291.5  Where must the proposal requesting Class III gaming 
procedures be filed?
291.6  What must the Secretary do upon receiving a proposal?
291.7  What must the Secretary do if it has been determined that the 
Indian Tribe is eligible to request Class III gaming procedures?
291.8  What must the Secretary do at the expiration of the 60-day 
comment period if the State has not submitted an alternative 
proposal?
291.9  What must the Secretary do at the end of the 60-day comment 
period if the State offers an alternative proposal for Class III 
gaming procedures?
291.10  What must the Indian Tribe do when it receives the State's 
alternative proposal Class III gaming procedures?
291.11  What must the Secretary do if the Indian Tribe files timely 
objections to the State's alternative proposal?
291.12  What is the role of the mediator appointed by the Secretary?
291.13  What must the Secretary do upon receiving the proposal 
selected by the mediator?
291.14  When do Class III gaming procedures for an Indian Tribe 
become effective?
291.15  How can Class III gaming procedures issued by the Secretary 
be amended?

    Authority: 5 U.S.C. 301; 25 U.S.C. 2,9, 2710.


Sec. 291.1  Purpose and scope.

    The regulations in this part establish procedures that the 
Secretary of the Interior will use to promulgate rules for the conduct 
of Class III Indian gaming when:
    (a) A State and an Indian Tribe are unable voluntarily to agree to 
a compact; and
    (b) The State has asserted its immunity from suit brought by an 
Indian Tribe under 25 U.S.C. 2710(d)(7)(B).


Sec. 291.2  Definitions.

    All terms have the same meaning as set forth in the definitional 
section of IGRA, 25 U.S.C. 2703(1)-(10).


Sec. 291.3  When may an Indian Tribe ask the Secretary to issue Class 
III gaming procedures?

    An Indian Tribe may ask the Secretary to issue Class III gaming 
procedures when the following steps have taken place:
    (a) The Indian Tribe submitted a written request to the State to 
enter into negotiations to establish a Tribal-State compact governing 
the conduct of Class III gaming activities;
    (b) The State and the Indian Tribe failed to negotiate a compact 
180 days after the State received the Indian Tribe's request;
    (c) The Indian Tribe initiated a cause of action in Federal 
district court against the State alleging that the State did not 
respond, or did not respond in good faith, to the request of the Indian 
Tribe to negotiate such a compact;
    (d) The State raised an Eleventh Amendment defense to the tribal 
action; and
    (e) The Federal district court dismissed the action because of lack 
of jurisdiction due to the State's sovereign

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immunity under the Eleventh Amendment.


Sec. 291.4  What must a proposal requesting Class III gaming procedures 
contain?

    A proposal requesting Class III gaming procedures must include the 
following information:
    (a) The full name, address, and telephone number of the Indian 
Tribe submitting the proposal;
    (b) A copy of the authorizing resolution from the Indian Tribe 
submitting the proposal;
    (c) A copy of the Indian Tribe's gaming ordinance or resolution 
approved by the NIGC in accordance with 25 U.S.C. 2710;
    (d) A copy of the Indian Tribe's organic documents;
    (e) A copy of the Indian Tribe's written request to the State to 
enter into compact negotiations, along with the Indian Tribe's proposed 
compact, if any;
    (f) A copy of the State's response to the tribal request and/or 
proposed compact, if any;
    (g) A copy of court proceedings in the litigation with the State in 
Federal district court on compact negotiations, including a copy of the 
order dismissing the lawsuit;
    (h) The Indian Tribe's factual and legal authority for the scope of 
gaming specified in paragraph (j)(13) of this section;
    (i) A regulatory scheme for Federal (or State, if any) oversight 
role in monitoring and enforcing compliance; and
    (j) Proposed procedures under which the Indian Tribe will conduct 
Class III gaming activities, including:
    (1) An accounting system maintained in accordance with American 
Institute of Certified Public Accountants (AICPA) Standards for Audits 
of Casinos, including maintenance of books and records in accordance 
with Generally Accepted Accounting Principles (GAAP), and any 
applicable NIGC regulations;
    (2) A reporting system for the payment of taxes and fees in a 
timely manner and in compliance with Internal Revenue Code and Bank 
Secrecy Act requirements;
    (3) Preparation of financial statements covering all financial 
activities of the Indian Tribe's gaming operations;
    (4) Internal control standards designed to ensure fiscal integrity 
of gaming operations;
    (5) Provisions for records retention, maintenance, and 
accessibility;
    (6) Conduct of games, including patron requirements, posting of 
game rules, and hours of operation;
    (7) Procedures to protect the integrity of the rules for playing 
games;
    (8) Rules governing employees of the gaming operation, including 
code of conduct, age requirements, conflict of interest provisions, 
licensing requirements, and background investigations of all management 
officials and key employees, vendors, lessors, or suppliers of gaming 
materials, equipment or supplies of any kind in excess of $5,000 per 
year, that comply with IGRA requirements, NIGC regulations, and 
applicable tribal gaming laws;
    (9) Policies and procedures that protect the health and safety of 
patrons and employees and that address insurance and liability issues, 
as well as safety systems for fire and emergency services at all gaming 
locations;
    (10) Surveillance procedures and security personnel and systems 
capable of monitoring all gaming activities, including the conduct of 
games, cashiers' cages, change booths, count rooms, movement of cash 
and chips, entrances and exits of gaming facilities, and other critical 
areas of any gaming facility;
    (11) An administrative process to resolve disputes between the 
gaming establishment and employees or patrons, including a process to 
protect the rights of individuals injured on gaming premises by reason 
of negligence in the operation of the facility;
    (12) Hearing procedures for licensing purposes;
    (13) A list of gaming activities proposed to be offered by the 
Indian Tribe at its gaming facilities;
    (14) A description of the location of proposed gaming facilities;
    (15) A copy of the Indian Tribe's liquor ordinance approved by the 
Secretary, if any;
    (16) Provisions for an autonomous tribal regulatory gaming 
commission, independent of gaming management;
    (17) Provisions for enforcement and investigatory mechanisms, 
including the imposition of sanctions, monetary penalties, closure, and 
an administrative appeal process relating to enforcement and 
investigatory actions; and
    (18) Any other provisions deemed necessary by the Indian Tribe.


Sec. 291.5  Where must the proposal requesting Class III gaming 
procedures be filed?

    Any proposal requesting Class III gaming procedures must be filed 
with the Director, Indian Gaming Management Staff, Bureau of Indian 
Affairs, U.S. Department of the Interior, MS 2070-MIB, 1849 C Street, 
NW, Washington, DC 20240.


Sec. 291.6  What must the Secretary do upon receiving a proposal?

    Upon receipt of a proposal requesting Class III gaming procedures, 
the Secretary must:
    (a) Within 15 days, notify the Indian Tribe in writing that the 
proposal has been received, and whether the proposal meets the 
requirements of Sec. 291.4; and
    (b) Within 30 days of receiving a complete proposal, notify the 
Indian Tribe in writing whether the Indian Tribe meets the eligibility 
requirements in Sec. 291.3. The Secretary's eligibility determination 
is final for the Department.


Sec. 291.7  What must the Secretary do if it has been determined that 
the Indian Tribe is eligible to request Class III gaming procedures?

    (a) If the Secretary determines that the Indian Tribe is eligible 
to request Class III gaming procedures and that the Indian Tribe's 
proposal is complete, the Secretary must submit the Indian Tribe's 
proposal to the Governor and the Attorney General of the State where 
the gaming is proposed.
    (b) The Governor and Attorney General will have 60 days to comment 
on:
    (1) Whether the State is in agreement with the Indian Tribe's 
proposal;
    (2) Whether the State believes it has negotiated in good faith with 
the Indian Tribe under 25 U.S.C. 2710(d)(3)(A);
    (3) Whether the proposal is consistent with relevant provisions of 
the laws of the State; and
    (4) Whether contemplated gaming activities are permitted in the 
State for any purposes, by any person, organization, or entity.
    (c) The Secretary will also invite the State's Governor and 
Attorney General to submit an alternative proposal to the Indian 
Tribe's proposed Class III gaming procedures.


Sec. 291.8  What must the Secretary do at the expiration of the 60-day 
comment period if the State has not submitted an alternative proposal?

    (a) Upon expiration of the 60-day comment period specified in 
Sec. 291.7, if the State has not submitted an alternative proposal, the 
Secretary must review the Indian Tribe's proposal to determine:
    (1) Whether all requirements of Sec. 291.4 are adequately 
addressed;
    (2) Whether Class III gaming activities will be conducted on Indian 
lands over which the Indian Tribe has jurisdiction;
    (3) Whether contemplated gaming activities are permitted in the 
State for any purposes by any person, organization, or entity;

[[Page 3296]]

    (4) Whether the proposal is consistent with relevant provisions of 
the laws of the State;
    (5) Whether the proposal is consistent with the trust obligations 
of the United States to the Indian Tribe;
    (6) Whether the proposal is consistent with all applicable 
provisions of the IGRA;
    (7) Whether the proposal is consistent with provisions of other 
applicable Federal laws; and
    (8) Whether the State has negotiated in good faith.
    (b) Within 60 days of the expiration of the 60-day comment period 
in Sec. 291.7, the Secretary must notify the Indian Tribe, the 
Governor, and the Attorney General of the State in writing that he/she 
has:
    (1) Approved the proposal if the Secretary determines that there 
are no objections to the Indian Tribe's proposal;
    (2) Disapproved the proposal if it does not meet the standards in 
paragraph (a) of this section; or
    (3) Identified unresolved issues and areas of disagreements in the 
proposal, and that the Indian Tribe, the Governor, and the Attorney 
General are invited to participate in an informal conference to resolve 
identified unresolved issues and areas of disagreement.
    (c) Within 30 days of the informal conference, the Secretary must 
prepare and mail to the Indian Tribe, the Governor, and the Attorney 
General:
    (1) A written report that summarizes the results of the informal 
conference; and
    (2) A final decision either setting forth the Secretary's proposed 
Class III gaming procedures for the Indian Tribe, or disapproving the 
proposal for any of the reasons in paragraph (a) of this section.


Sec. 291.9  What must the Secretary do at the end of the 60-day comment 
period if the State offers an alternative proposal for Class III gaming 
procedures?

    Within 7 days of receiving the State's alternative proposal, the 
Secretary must submit the State's alternative proposal to the Indian 
Tribe for a 60-day comment period.


Sec. 291.10  What must the Indian Tribe do when it receives the State's 
alternative proposal for Class III gaming procedures?

    (a) If the Indian Tribe objects to the State's alternative 
proposal, it may, within 60 days of receiving the alternative proposal, 
notify the Secretary in writing of its objections.
    (b) If the Indian Tribe does not file written objections within 60 
days of receiving of the State's alternative proposal, the Secretary 
must, within 60 days of the expiration of the Indian Tribe's comment 
period in Sec. 291.9, notify the Indian Tribe, the Governor, and the 
Attorney General, in writing of his/her decision to either:
    (1) Approve the State's alternative proposal for Class III gaming 
procedures; or
    (2) Disapprove the State's alternative proposal for any of the 
reasons in Sec. 291.13(b).


Sec. 291.11  What must the Secretary do if the Indian Tribe files 
timely objections to the State's alternative proposal?

    If the Indian Tribe files timely objections to the State's 
alternative proposal, the Secretary must appoint a mediator who must 
convene a process to resolve differences between the two proposals.


Sec. 291.12  What is the role of the mediator appointed by the 
Secretary?

    (a) The mediator must ask the Indian Tribe and the State to submit 
their last best proposal for Class III gaming procedures.
    (b) After giving the Indian Tribe and the State an opportunity to 
be heard and present information supporting their respective positions, 
the mediator must select from the two proposals the one that best 
comports with the terms of the IGRA and any other applicable Federal 
law. The mediator must submit the proposal selected to the Indian 
Tribe, the State, and the Secretary.


Sec. 291.13  What must the Secretary do upon receiving the proposal 
selected by the mediator?

    Within 60 days of receiving the proposal selected by the mediator, 
the Secretary must do one of the following:
    (a) Notify the Indian Tribe, the Governor and the Attorney General 
in writing of his/her decision to approve the proposal for Class III 
gaming procedures selected by the mediator.
    (b) Notify the Indian Tribe, the Governor and the Attorney General 
in writing of his/her decision to disapprove the proposal selected by 
the mediator for any of the following reasons:
    (1) The requirements of Sec. 291.4 are not adequately addressed;
    (2) Gaming activities would not be conducted on Indian lands over 
which the Indian Tribe has jurisdiction;
    (3) Contemplated gaming activities are not permitted in the State 
for any purpose by any person, organization, or entity;
    (4) The proposal is not consistent with relevant provisions of the 
laws of the State;
    (5) The proposal is not consistent with the trust obligations of 
the United States to the Indian Tribe;
    (6) The proposal is not consistent with applicable provisions of 
the IGRA; or
    (7) The proposal is not consistent with provisions of other 
applicable Federal laws.
    (c) If the Secretary rejects the mediator's proposal under 
paragraph (b) of this section, he may prescribe appropriate procedures 
under which Class III gaming may take place consistent with the 
mediator's selected compact, the provisions of IGRA and the relevant 
provisions of the laws of the State.


Sec. 291.14  When do Class III gaming procedures for an Indian Tribe 
become effective?

    Upon approval of Class III gaming procedures for the Indian Tribe 
under either Sec. 291.8(b), Sec. 291.8(c), Sec. 291.10(b)(1), or 
Sec. 291.13(a), the Indian Tribe shall have 90 days in which to approve 
and execute the Secretarial procedures and forward its approval and 
execution to the Secretary, who will publish notice of their approval 
in the Federal Register. The procedures take effect upon their 
publication in the Federal Register.


Sec. 291.15  How can Class III gaming procedures approved by the 
Secretary be amended?

    An Indian Tribe may ask the Secretary to amend approved Class III 
gaming procedures by submitting an amendment proposal to the Secretary. 
The Secretary must review the proposal by following the approval 
process for initial tribal proposals, except that he/she may waive the 
requirements of Sec. 291.4 to the extent they do not apply to the 
amendment request.

    Dated: December 8, 1997.
Kevin Gover,
Assistant Secretary--Indian Affairs.
[FR Doc. 98-1409 Filed 1-22-98; 8:45 am]
BILLING CODE 4310-02-P