Office of the Governor

Pueblo of Tesuque

Route 42 Box 360-T

Santa Fe, New Mexico 87506

February 8, 2011

Tracie Stevens, Chairwoman

National Indian Gaming Commission

1441 L Street, NW, Suite 9100

Washington, DC 20005

E-mail: reg.review@nigc.gov

Re: NIGC Notice of Inquiry

Dear Chairwoman Stevens:

I write on behalf of the Pueblo of Tesuque to comment on the National Indian Gaming

Commission's (NIGC or "Commission") Notice ofInquiry and Request for Information. As you

know, the goals and purposes of the Indian Gaming Regulatory Act (IGRA or "the Act") are to

strengthen tribal governments, tribal economic self-sufficiency, and to provide a statutory basis

for the regulation of Indian gaming. The Act acknowledges that tribal regulatory agencies are

the primary day-to-day regulators of Indian gaming. These goals and factors should guide the

NIGC as it prepares its regulatory review agenda.

Consultation and Technical Assistance

The overall regulatory strategy of the NIGC is in need of an overhaul. Past NIGC

administrations operated under a punitive philosophy that viewed penalties and fines as the only

effective means for· securing compliance with IGRA and NIGC regulations. This strategy

ignores the above-stated goals of IGRA and the fact that tribal regulatory agencies are the

primary day-to-day regulators of Indian gaming.

The prior administration moved forward on new regulatory proposals, developed budgets

for outlying years, hired key personnel and reorganized regional offices, and took other actions

affecting Indian gaming, all without meaningful input by tribal leaders. As a result, we hope that

the current NIGC will treat this regulatory review as an opportunity to revisit regulations with

true input from tribal governments in mind.

It is encouraging that the NIGC, in its published notice of inquiry, acknowledges that

Executive Order 13175 entitled "Consultation and Coordination with Indian Tribal

Governments," applies to the Commission and require the NIGC to engage in meaningful

consultation with tribal governments prior to taking an action that has tribal implications.

Meaningful consultation must be the benchmark for all actions taken by NIGC.

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Phone (505) 983-2667 Fax (505) 982-2331
In addition, the Commission must emphasize the provision of training and technical

assistance to tribal regulatory agencies. Given the increasingly complex and detailed nature of

the NIGC's regulations and the frequency of its regulatory revisions, tribal governments and

tribal regulators have a longstanding request to increase NIGC-provided technical assistance.

While steps have been taken in this direction, the NIGC has yet to make progress in this area. In

2009, the NIGC submitted a technical assistance plan as contained in Public Law 109-221, Title

III, §301(a). Under the strategic plan submitted to the OMB, the NIGC moved to establish and

implement effective training programs focused on "expressed or perceived tribal needs." The

strategic plan noted that a technical assistance "strategy will require the dedication of significant

resources, and will consequently require adequate budgetary planning." The Commission has

yet to finalize or commit resources to implement a technical assistance strategy. The NIGC

should immediately comply with P.L. 109-221 and finalize and implement a robust technical

assistance plan in conjunction with its mission under IGRA.

Class III Minimum Internal Control Standards

The NIGC adopted and implemented its Minimum Internal Control Standards (MICS)

regulations (25 C.F.R. Part 543) in 1999 over the objection of many tribal governments.

Congress, through the Indian Gaming Regulatory Act, set forth a regulatory scheme that

balanced the interests and responsibilities of tribal, federal, and state governments among the

various classes of Indian gaming. Tribes correctly argued that IGRA vested the NIGC with a

limited oversight role in the regulation of class III gaming, which was primarily regulated by

provisions included in carefully negotiated tribal-state gaming compacts that were approved by

the Secretary of the Interior. Tribes thus contended that the NIGC did not have authority to

promulgate the MICS. Federal courts, most notably the D.C. Circuit Court of Appeals in

Colorado River Indian Tribes (CRIT) v. NIGC, have unanimously agreed with the tribes, finding

that IGRA did not authorize the NIGC to promulgate the MICS for class III gaming.

The Commission's NOI acknowledges the CRIT decision, and also acknowledges that

care must be taken when amending any regulation. Many tribes believe that the class III MICS

should be struck and replaced with a recommended guideline. However, some tribes

acknowledge that the NIGC's MICS are referenced in their tribal-state compacts, and have raised

some concerns about the effect of striking the regulations on those compacts. As a result, we do

agree that caution should be taken when making a decision on how to strike and restructure the

class III MICS.

Tribes have always agreed that minimum internal controls play an essential role in

protecting precious tribal governmental revenues generated by gaming. The National Indian

Gaming Association and its Member Tribes initiated the formation of tribal MICS in the 1990's.

The NIGC's role in developing and establishing the MICS, while flawed, in some sense

maximized tribal resources by pulling together a comprehensive list of regulations based on

industry standards. However, tribal governments and tribal gaming regulators, the local day-today overseers of Indian gaming, know best what standards are needed in their particular

establishment. Tribes and tribal regulators have a significant vested interest in protecting revenue

generated by Indian gaming.

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Class II Gamin!!:

As noted above, Congress, in enacting IGRA, struck a careful balance among the

respective interests of three sovereigns: tribal, federal, and state governments. That balance was

critically upset by the Supreme Court's 1996 decision in Seminole Tribe v. Florida, which found

that a state could refuse to negotiate class III tribal-state gaming compacts in good faith. This

decision has resulted in a number of state houses (many of which condone and regulate other

forms of gaming) exercising veto authority over class III Indian gaming. As a result, Indian

tribes in these states rely solely on class II gaming to generate governmental revenue to provide

essential services to meet the many needs of their communities.

For most of the past decade, the NIGC has created great uncertainty in the area of class II

Indian gaming. With little tribal input, the NIGC in past years developed unworkable gaming

classification standards that went beyond the statutory authority granted in IGRA and that

threatened the economic viability of class II gaming. Many of these proposed regulations sought

to limit class II games to only those in play in 1988. This view stands in direct conflict with

congressional intent when enacting IGRA. The Senate Committee Report to IGRA states the

following:

The Committee specifically rejects any inference that tribes should restrict Class

II games to existing game sizes, levels of participation, or current technology. The

Committee intends that tribes be given the opportunity to take advantage of

modem methods of conducting Class II games and the language regarding

technology is designed to provide maximum flexibility.

The NIGC should make it a priority to revisit regulations that affect class II Indian

gaming in consultation with all tribal governments and tribal regulatory agencies.

Part 543: Class II Minimum Internal Control Standards

The existing Class III MICS are incorporated by reference in Section 543.1 of the class II

MICS. In 2008, the NIGC convened a tribal working group to assist in the revision of Part 542,

but late in the process, the NIGC announced its intent to simply paste the Part 542 revisions into

Part 543 without an adequate examination of whether such a wholesale approach was appropriate

in light of the distinctions between class II and III gaming. Moreover, the NIGC did not achieve

a consensus draft in relation to the proposed Part 542 revisions, nor did it seek meaningful input

from tribes that significantly rely on class II gaming.

During the rulemaking process for the class II MICS, tribes raised a concern that the

regulations contained inherent conflicts and inconsistencies created by overlapping regulations

spanning two parts of the Code of Federal Regulations. For instance, Part 543 contains a

different definition of "random number generator" than Part 542. At the time, the NIGC

responded that it recognized the different definitions could cause confusion, but the need to act

was apparently considered urgent enough to let the confusion stand. There are a number of other

issues with the class II MICS that were raised by tribes in their comments that went ignored

without adequate reasoning provided.

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The NIGC should revisit the Part 542 regulations referenced in Part 543 to ensure that:

the regulations are consistent with IGRA; the regulations reflect a distinction between the classes

of gaming and types of games listed in IGRA; and other concerns that have been and will be

raised by tribes and tribal regulators once they are fully consulted. The NIGC should undertake

a full regulatory review of Parts 542 and 543 through a broad consultation process.

Part 547: Technical Standards for Class II Games

The NIGC should also revisit the class II Technical Standards to address issues raised

during the past rulemaking that were never resolved. For example, Part 547 contains game recall

provisions that require the player interface to display results of any alternate display. The ability

of the player interface to recall alternate displays has no legal relevance and does not belong in

the regulations. This requirement not only confuses the reality of the game, but also threatens to

obscure the distinction between the legal relevance of a bingo game and any alternate

entertaining display. In addition, the standards for bingo were simply adopted for games similar

to bingo, but those games, while "similar" to bingo, are also different and require differences in

their regulation. There should be a distinction between bingo and "games similar to bingo" for

the purposes of class II Technical Standards as IGRA acknowledges that these are different

games.

The NIGC should undertake a full regulatory review of Part 547 to address these and

other issues with the Technical Standards for class II games.

Self-Regulation of Class II Gaming

The self-regulation certification process set forth at Part 518, promulgated in 1998, needs

updated. Section 2710(c)(3)-(5) of IGRA sets forth a framework under which the NIGC must

issue a certificate of self-regulation for class II gaming. The current application process for selfregulation is unreasonably burdensome and provides limited actual benefit to a tribe that receives

self-regulation certification. In fact, the current process actually results in tribes facing an

increased regulatory burden in that they must file annual reports on their usage of net gaming

revenues among many other items.

Regulatory review and revision of the self-regulation process should be accorded a high

priority. At a minimum, the NIGC should strike the current self-regulation regulations, and, in

consultation with tribal governments and tribal regulators, replace them with objective standards

that go no further than those requirements set forth in IGRA. The NIGC should simplify the

requirements for submitting a petition, eliminating any requirements for submission of

information already in the possession of the federal government, eliminating the submission of

information not related to gaming (including data on its expenditures for governmental

operations and services, increasing the benefits of becoming a self-regulating tribe by reducing

federal oversight over Class II gaming operations in accordance with §271O(c)(5)(A), and

significantly limiting reporting requirements for tribes holding a certificate of self-regulation.

Part 559: Facilities Licensine; Ree;ulations

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The facility licensing regulations were promulgated with a short comment period and no

opportunity for meaningful consultation. The result is an unnecessary and duplicative federal

mandate that arguably goes far beyond the rramework set forth in IGRA and violates the

Paperwork Reduction Act and other federal laws and executive orders. Tribal governments have

tribal laws and regulations that are more than sufficient to meet the concerns underlying facility

licensing on their reservation. In addition, tribes should be able to issue their own licensing

certificates for new facilities without having to comply with additional requirements rrom the

NIGC. The NIGC should re-open these regulations and meaningfully consult with Tribes to

ensure that the regulations are authorized under and consistent with the purpose of the IGRA.

Buv Indian

As noted above, one of the primary purposes of IGRA is to foster tribal government

economic self-sufficiency. To help foster tribal economic self-sufficiency, the NIGC should

adopt a regulation to implement the Buy Indian Act. The Buy Indian Act, states simply: "so far

as may be practicable Indian labor shall be employed, and purchases of the products of Indian

industry may be made in open market in the discretion of the Secretary of the Interior." (25

D.S.C.47). Such a regulation should give preference to qualified tribal government-owned and

individual Indian-owned businesses when the NIGC procures goods or services.

In closing, I want to thank the Commission for undertaking this regulatory review and the

significant consultation that has been conducted with tribes and tribal regulatory agencies to date.

We look forward to rebuilding and strengthening the partnership with the Commission. Thank

you in advance for your consideration of the recommendations made in this comment.

Sincerely,

~~l~

Mark Mitchell, Governor

Pueblo of Tesuque

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Additional Comments on The NIGC's Regulatory Review

Part 502: Definitions

Management Contracts: The Notice of Inquiry asks whether the definition of

management contracts should be expanded to include any contract, such as slot lease agreements,

that pays a fee based on a percentage of gaming revenues. The NIGC should not expand the

definition of "management contract" to include any contract that pays a fee based on a

percentage of gaming revenue because not all "participation agreements" constitute management

contracts. It is laudable that the NIGC permits tribes to request its review of agreements when a

tribe is uncertain whether a particular agreement constitutes a management contract, but such

review should not be mandatory.

Part 514: Fees

Fee Schedule - Calendar Year or Fiscal Year

Revising Part 514 to base fees on the gaming operation's fiscal year rather than its

calendar year would be useful to tribes that have established accounting policies based on the

fiscal year. The Commission should allow each tribe to elect based on whether they operate

under a fiscal or calendar year.

Penalties for Late Payment of Fees

The NIGC should consider a late payment system in lieu of a Notice of Violation (NOV)

for submitting fees late as it would be preferred over the NIGC's current practice of issuing

NOVs. The current use of NOV's overly penalizes a tribe for failure to submit even one

payment on time. This can occur innocently after a change in government leadership or

employee turnover. Treating an easily-fixable oversight with the same level of severity as

operating gaming without a facility license, defrauding a customer, or allowing individuals

without approved management contracts to manage the gaming is overly punitive. An NOV can

degrade a tribal facility's bond ratings, loan percentage rates, and business reputation. New

regulations should allow a warning notice to the Tribe, followed by assessment of a minimal late

fee. Only in cases where multiple fee payments have gone completely unpaid or the tribal

governing body has officially resolved not to pay NIGC fees, should an NOV be considered, and

then only after negotiation with the tribe.

Proposed Ree:ulation: Sole Proprietary Interest

The NIGC should take a cautious approach in interpreting the "sole proprietary interest"

provision of the IGRA. Tribal governments have the right to exercise their independent judgment

in relation to the operation of their gaming enterprises. Rather than issuing a legislative rule or

strict regulatory definition of sole proprietary interest, the NIGC should consider publishing an

interpretive rule or a guidance document so as to grant Tribes maximum independence in

operating their gaming facilities.

The NIGC should avoid taking an expansionist approach of the phrase "sole proprietary

interest and responsibility." An expansionist reading may be used by the NIGC to identify a

contract that does not provide for the best financial arrangement, but doing so may come at the

cost of eroding the legitimate exercise of that Tribe's powers of self-governance.

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Congress anticipated and allowed for the circumstance that some Tribes would outsource

the daily gaming operation and further, the IGRA authorizes Tribes to convey a significant

measure of control over gaming activities to a third-party operator by means of a management

contract. Legislative history also demonstrates that Congress intended for sole proprietary

interest to mean that Tribes should be the "sole owner" of the gaming enterprise. Attempting to

stretch the meaning of sole proprietary interest to more than "owning" the gaming activity is not

compatible with the balance of the IGRA and the obvious intent of Congress in enacting it. The

construction of sole proprietary interest should not be taken in isolation, but must be approached

contextually in light of the overall statutory scheme of the IGRA.

Rulemakin2

NIGC should employ negotiated rulemaking with tribal governments to the maximum

extent possible. While tribal advisory committees are a practical means of developing draft

regulations, additional consultative mechanisms should be employed prior to the publication of

proposed rules or regulations.

NIGC should take into consideration all tribal interests when engaging in rulemaking

activities, including, without limit the following:

• Establishing a reasonable timeframe for accepting comments. Tribal governments, like

state and federal governments, have internal processes that must be followed, which often

entail multiple clearance levels. Abbreviated deadlines may make it impossible for a

tribal government to submit cleared comments.

• Establishing a reasonable timeframe for implementation, mindful of the fact that tribal

governments operate on an annual funding cycle and sufficient time to budget for the

implementation of new regulations is essential to compliance.

• Adopting a more cost conscious approach, including the preparation of a cost benefit and

economic impact analysis prior to the promulgation of rules and regulations.

Enforcement

NIGC should adopt an enforcement policy reflective of a civil regulatory regime rather

than a punitive criminal enforcement regime consistent with the overall purposes and goals ofthe

statute and the civil nature of NIGC's function. The NIGC's enforcement regulations reflect a

punitive approach to enforcement rather than one founded on the civil regulatory regime

intended by IGRA. NIGC's enforcement authority under the IGRA, which includes the authority

to levy and collect fmes and order temporary and permanent closures, can and should be

interpreted in light of Congress' stated intent for "tribes to have the exclusive right to regulate

gaming activity on Indian lands" and to advance the "principal goal[s] of ... tribal selfsufficiency and strong tribal government." We encourage the NIGC to adopt a voluntary

compliance model that would defer to tribal regulatory agencies on enforcement and provide a

notice and opportunity to cure before the NIGC steps in. This would be consistent with the

general practice of other federal agencies with similar oversight regulatory roles.

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