PUBLISH UNITED STATES COURT OF APPEALS Filed 8/23/96 TENTH CIRCUIT

MUSTANG PRODUCTION COMPANY, et al,

Plaintiffs - Appellants,

v. ALTON HARRISON, et al,

Defendants - Appellees. and WARD PETROLEUM CORPORATION,

Plaintiff - Appellant,

v. JUANITA LEARNED, et al,

Defendants - Appellees. No. 95-6287

No. 95-6292

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA (D. Ct. Nos. CV-88-1801 & CV-88-1954)
Steven W. Bugg (Stanley L. Cunningham, with him on the briefs), McAfee & Taft, Oklahoma City, Oklahoma, appearing for the Ap pellants. Melody L. McCoy, Native American Rights Fund, Bould er, Colorado, appearing- 2 -

for Appellees. Elizabeth Anne Peterson, Attorney, Department of Ju stice (Lois J. Schiffer, Assistant Attorney General, Bradley Scott Bridgewat er and Edward J. Shawaker, Attorneys, Department of Justice, and Barbara Coen, Of Counsel, Office of the Solicitor, with her on the brief), appearing for am icus curiae United States of America.
Before TACHA, MCWILLIAMS, and MURPHY, Circuit Judge s.
TACHA, Circuit Judge.
The issue in this case is whether the Cheyenne-Arap aho Tribes of Oklahoma (“the Tribes”) may impose a severance tax on oil and gas production on allotted lands held in trust for their members. The appellants are nineteen oil and gas companies and one individual (collectively referred to as “Mustang”) who hold oil and gas leases on the allotted lands. The appellees are members of the Business Committee and the Tax Commission, the trib al government entities responsible for promulgating and enforcing the tax at issue. The CheyenneArapaho District Court (“the Tribal Court”), the Tr ibal Supreme Court, and the federal district court all held that allotted lands are subject to taxation by the Tribes. Mustang Fuel Corp. v. Hatch , 890 F. Supp. 995 (W.D. Okla. 1995) (district court opinion in this case). Our jurisdi ction arises under 28 U.S.C. §1291, and we affirm. BACKGROUND- 3 -

In 1865, the United States signed a treaty creating a reservation for the Tribes in western Oklahoma. An 1869 Executive Orde r implemented the treaty and delineated the boundaries of the reservation (“ the 1869 reservation”). In 1890, the United States and the Tribes signed an Al lotment and Cession Agreement (“the Agreement”), the subject of which w as the land within the 1869 reservation as well as other land which had been mi stakenly reserved to the Tribe by a treaty signed in 1867. The Agreement took eff ect by an Act of Congress on March 3, 1891 (“the Act”). Article I of the Act provided that the Tribes wouldcede to the United States all land mistakenly reserved to the Tribes i n the 1867 treaty. Article II stated that, subject to the allotment of land to in dividual members of the Tribes, the Tribes would cede all land within the boundarie s of the 1869 reservation. Article III provided allotments of land to all memb ers of the Tribe “out of the lands ceded, conveyed, transferred, relinquished, and surrendered by Article II.” The allotted lands were to be held in trust by the federal government for individual members of the Tribe. All of the allott ed lands involved in this case continue to be held in trust. In April 1988, the Tribes enacted a General Revenue and Taxation Act (“the Tax Act”), which taxes, among other things, o il and gas “produced, severed, saved, and removed from any land within the jurisdi ction of the Cheyenne-- 4 -

Arapaho Tribes of Oklahoma.” Tax Act §§ 401 & 402. Taxpayers may pay under protest, in which case the disputed money is held i n a separate account pending final resolution of their protest. Tax Act §118. After exhausting administrative remedies, a taxpayer may bring an action in tribal court to recover any taxes, penalties, or interest paid under protest or to enj oin the Tax Commission from collecting disputed revenues. Tax Act §§151-155. The Tribes taxed Mustang for oil and gas that Mustang extracted on allotted lands pursuant to oil and gas leases. In 1988, Mustang filed this suit in federal district court challenging the Tribes’ auth ority to tax oil and gas production on allotted lands. The court stayed the action pending Mustang’s exhaustion of tribal remedies. In 1989, the Tribal Court held that allotted lands are “a part of the Cheyenne and Arapaho Indian rese rvation, and that said allotments are ‘Indian Country’ as the term is defi ned by federal law, and that said allotments are subject to taxation by the trib al government.” The Tribal Supreme Court affirmed, and further held that Congr ess has not divested the Tribes of their inherent authority to tax activitie s that occur on allotted lands. After Mustang exhausted its tribal remedies, the di strict court reopened the case and granted summary judgment in favor of the T ribes. The court held that allotted lands are Indian country, and thus subjectto tribal jurisdiction and the Tribes’ inherent authority to tax activities on tri bal lands. Mustang , 890 F. Supp- 5 -

at 1001-03. Mustang appeals, arguing that under th e 1890 Agreement, the Tribe lost jurisdiction over all of the lands in the 1869 reservation, including lands allotted to individual tribal members. DISCUSSION I. Standard of Review This Circuit has never decided what standard a fede ral court should use to review a tribal court decision regarding tribal jur isdiction. The district court did not clearly articulate what standard it used to rev iew the Tribal Supreme Court’s ruling, but noted that the Tribal Supreme Court’s d ecision was “helpful” in resolving the issue in this case. Id. at 999-1000. Mustang urges us to adopt the standard articulated by the Ninth Circuit in FMC v. Shoshone-Bannock Tribes , 905 F.2d 1311, 1313-14 (1990), which requires defer ence to a tribal court’s findings of fact and de novo review of its conclusi ons of law. In FMC , the Ninth Circuit relied on the Supreme Court’s d ecision in National Farmers Union Insurance Co. v. Crow Tribe of Indians , 471 U.S. 845, 856-57 (1985), to determine the appropriate standar d of review. Pointing to the Supreme Court’s statement that “the orderly adminis tration of justice in the federal court will be served by allowing a full rec ord to be developed in the Tribal Court,” id. at 856, the FMC court reasoned that a tribal court’s factual findi ngs should be reviewed for clear error, 905 F.2d at 131 3. The Supreme Court further- 6 -

stated in National Farmers Unionthat mandatory exhaustion of tribal court remedies is helpful because it provides other court s with the “benefit of their expertise.” 471 U.S. at 857. The Ninth Circuit in terpreted this to mean that while federal courts may be guided by a tribal court’s expertise, they have no obligation to defer to a tribal court’s decision, and thus leg al questions should be reviewed de novo. FMC , 905 F.2d at 1313-14. We are persuaded by the Ninth Circuit’s analysis. We hold that when reviewing tribal court decisions on jurisdictional issues, district courts should review tribal courts’ findings of fact for clear er ror and conclusions of law de novo. Although the district court was imprecise as to what standard it applied in this case, we are satisfied that the court deferred to the tribal court’s findings of fact and reviewed de novo the legal question of tri bal jurisdiction over allotted lands. II. Tribal Jurisdiction Over Allotted Lands Mustang argues that the Tribes do not have authority over the allotted lands and thus cannot tax oil and gas production on those lands. Mustang contends that the Tribes lost jurisdiction over all of the lands in the 1869 reservation, including allotted lands, when the 1890 Agreement disestablis hed the reservation. According to Mustang, when the Agreement set aside allotted lands for individual tribal members, it also divested the Tribe of its j urisdiction over those lands.- 7 -

As the district court correctly concluded, however, disestablishment of the reservation is not dispositive of the question of tribal jurisdiction. Mustang , 890 F. Supp. at 1001. In order to determine whether th e Tribes have jurisdiction we must instead look to whether the land in question i s Indian country. See Indian Country U.S.A. Inc. v. Oklahoma , 829 F.2d 967, 973 (10th Cir. 1987) (“[T]he Indian country classification is the benchmark for approaching the allocation of federal, tribal and state authority with respect to Indians and Indian lands.”). Indian country encompasses those areas that have be en “validly set apart for the use of the Indians as such, under the superintenden ce of the Government.” Oklahoma Tax Comm’n v. Citizen Band Potawatomi Indi an Tribe , 498 U.S. 505, 511 (1991) (quoting United States v. John , 437 U.S. 634, 648-49 (1978)). In Oklahoma Tax Commission v. Sac and Fox Nation , 113 S. Ct. 1985, 1991 (1993), the Supreme Court specifically stated that “Indian allotments, whether restricted or held in trust by the United S tates,” are Indian country. In that case, the state argued that members of the Sac and Fox Nation were subject to state taxation because an 1891 treaty disestablishe d their reservation. Id. at 1889. The Court rejected this argument and held that “a t ribal member need not live on a formal reservation to be outside the State’s taxi ng jurisdiction; it is enough that the member live in ‘Indian country.’” Id. at 1991. Mustang argues that Sac and Fox Nationdoes not apply because the issue- 8 -

in that case was a state’s, rather than a tribe’s, civil jurisdiction. We agree with the district court, however, that “[t]he issue is a nalogous--whether one government can tax citizens of another government e ngaging in activities on allotted lands.” Mustang , 890 F. Supp. at 1001. “Indian tribes are ‘domest ic dependent nations’ that exercise inherent sovereignauthority over their members and territories.” Potawatomi Indian Tribe , 498 U.S. at 509 (quoting Cherokee Nation v. Georgia , 5 Pet. 1, 17 (1881)). The sovereign authority of Indian tribes includes the inherent power to tax non-Indians who conduct business on tribal lands and who benefit from governmental services pr ovided by the tribes. Merrion v. Jicarilla Apache Tribe , 455 U.S. 130, 137, 140-41 (1982). As discussed above, Indian tribes have jurisdiction ov er lands that are Indian country, and allotted lands constitute Indian country. See DeCoteau v. District County Court , 420 U.S. 423, 446 (1975) (noting that allotments provide “an adequate fulcrum for tribal affairs” and that there is “excl usive tribal and federal jurisdiction” over allotted lands). Thus, we agree with the district court that the Tribes have “an inherent sovereign power to tax eco nomic activities on their lands, and because the allotted lands are within th eir jurisdiction, the Tribes have the power to enact and enforce a severance tax on o il and gas production from allotted lands.” Mustang , 890 F. Supp. at 1003. Mustang argues that the Tribes would have authorityover allotted lands- 9 -

only if Congress passed an act specifically grantin g them jurisdiction, and that the Indian country statute, 18 U.S.C. § 1151 et. seq., grants criminal but not civil jurisdiction over allotted lands. The Indian count ry statute defines Indian country to include “all Indian allotments, the Indian title s to which have not been extinguished, including rights-of-way running throu gh the same.” 18 U.S.C. § 1151(c). Although the statute appears in Title 18, which deals primarily with crimes and criminal procedures, the Supreme Court h as held that § 1151 applies to civil jurisdiction as well. DeCoteau , 420 U.S. at 427 n.2; see also Pittsburg & Midway Coal Mining v. Watchman , 52 F.3d 1531, n.10 (10th Cir. 1995) (“[T]he principle that § 1151 defines Indian country for bo th civil and criminal jurisdiction purposes is firmly established. Any s uggestion to the contrary . . . is simply erroneous.”). Thus, Mustang’s argument that§ 1151 does not apply to civil jurisdiction is incorrect, and the statute supports our conclusion that the Tribes have jurisdiction over the allotted lands. The language of the 1891 Act, which ratified verbat im the agreement between the Tribes and the United States, also supp orts our conclusion. Article II of the Act provides: Subject to the allotment of landin severalty to the individual members of the Cheyenne and Arapaho tribes of Indians, as hereinafter provided forand subject to the conditions hereinafter imposed, for the considerations hereinafter mention ed the said Cheyenne and Arapaho Indians hereby cede, convey, transfer, relinquish, and surrender forever and absolutely, w ithout any- 10 -

reservation whatever, express or implied, all theirclaim, title and interest, of every kind and character, in and to th e lands [in the 1869 reservation]. 26 Stat. 989, 1022 (emphasis added). The “subject to the allotment of land” clause modifies the cession language and expressly conditions the cession of some lands on the allotment of other lands. In addition , the “subject to the allotment of lands” provision implicitly excludes the allotted lands from the ceded lands. Therefore, the comprehensive terms of the cession d o not apply to the allotted lands. Article III of the Act describes the details of the allotment procedure: Out of the lands ceded, conveyed, transferred, reli nquished, and surrendered by Article II hereof, and in part consi deration for the cession of lands named in the preceding article , it is agreed by the United States that each member of the said Cheyenne and Arapaho tribes of Indians over the age of eighteen years sh all have the right to select for himself or herself one hundred and sixtyacres of land, to be held and owned in severalty . . . . 26 Stat. 989, 1023 (emphasis added). Mustang conte nds that because allotments were selected “out of the lands ceded,” the allotte d lands were ceded as well. This reading of the provision is incorrect. Articl e III merely describes who was entitled to allotments, identifies the land from wh ich the allotments were to be selected, and describes the size of the allotments- -it says nothing about which land is ceded, a subject covered in Articles I and II. Article I unconditionally cedes the land that was mistakenly reserved to the Tribes. Article II cedes the- 11 -

land in the 1869 reservation, but not unconditional ly: the cession in Article II is subject to allotment . The plain language of the Act indicates that whi le the allotted lands were selected from the lands ceded, the allotted lands themselves were not ceded. Instead, the allotted lands were s et aside for the use of the Indians, remaining part of Indian country even afte r the reservation was disestablished. In conclusion, we hold that the allotted lands cons titute Indian country over which the Tribes have civil jurisdiction. Thus, th e Tribes have the power to enact and enforce a severance tax on oil and gas producedon allotted lands. Accordingly, the decision of the district court is AFFIRMED.