Indian Issues: Analysis of the Crow Creek Sioux and Lower Brule Sioux Tribes' Additional Compensation Claims
Published: 2006-05-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: From 1946 to 1966, the government constructed the Fort Randall and Big Bend Dams as flood control projects on the Missouri River in South Dakota. The reservoirs created behind the dams flooded about 38,000 acres of the Crow Creek and Lower Brule Indian reservations. The tribes received compensation when the dams were built and additional compensation in the 1990s. The tribes are seeking a third round of compensation based on a consultant's analysis. The Congress provided additional compensation to other tribes after two prior GAO reports. For those reports, GAO found that one recommended approach to providing additional compensation would be to calculate the difference between the tribe's final asking price and the amount that was appropriated by the Congress, and then to adjust it using the inflation rate and an interest rate to reflect a range of current values. GAO was asked to assess whether the tribes' consultant followed the approach used in GAO's prior reports. The additional compensation amounts calculated by the tribes' consultant are contained in H.R. 109 and S. 374.
section_title: What GAO Found
paragraphs: The tribes' consultant differed from the approach used in prior GAO reports by (1) not using the tribes' final asking prices as the starting point of the analysis and (2) not providing a range of additional compensation. First, in calculating additional compensation amounts, GAO used the tribes' final asking prices, recognizing that their final settlement position should be the most complete and realistic. In contrast, the consultant used selected figures from a variety of tribal settlement proposals. For example, for the rehabilitation component of the tribes' settlement proposals, the consultant used $13.1 million from proposals in 1957, rather than $6.7 million from the tribes' final rehabilitation proposals in 1961. Second, the tribes' consultant calculated only the highest additional compensation dollar value rather than providing the Congress with a range of possible additional compensation based on different adjustment factors, as in the earlier GAO reports. Based on calculations using the tribes' final asking prices, GAO's estimated range of additional compensation is generally comparable with what the tribes were authorized in the 1990s. By contrast, the consultant estimated about $106 million and $186 million for Crow Creek and Lower Brule, respectively (in 2003 dollars). There are two primary reasons for this difference. First, GAO used the tribes' final rehabilitation proposals from 1961, rather than the 1957 proposals used by the consultant. Second, GAO's dollar amounts were adjusted only through 1996 and 1997 to compare them directly with what the tribes received at that time. The consultant, however, adjusted for interest earned through 2003, before comparing it with the payments authorized in the 1990s. The additional compensation already authorized for the tribes in the 1990s is consistent with the additional compensation authorized for other tribes on the Missouri River. GAO's analysis does not support the additional compensation amounts contained in H.R. 109 and S. 374.

section_title: Letter
paragraphs: During a 20-year period, from 1946 to 1966, the federal government  constructed the Fort Randall and Big Bend Dams as flood control projects  on the Missouri River in South Dakota. Installation of the dams caused the  permanent flooding of approximately 38,000 acres of the Crow Creek Sioux  and Lower Brule Sioux Indian reservations. During the construction of the  two dams, the tribes entered into negotiations with the federal government  for compensation for their land that would be flooded by the reservoirs  created by the dams. The settlement negotiations for the Fort Randall Dam  stretched over several years, and the tribes put forward a number of  different settlement proposals. The settlement negotiations for the Big  Bend Dam were conducted in a much shorter time frame, but there still  were a number of settlement proposals and counterproposals. In both  cases, the tribes and the federal government were unable to reach a  negotiated settlement, and the Congress stepped in and imposed a  legislative settlement. For both dams, the legislative settlements to the  tribes were less than the amounts that they requested.
The settlement processes for the two dams spanned several decades— beginning in 1958, when the Congress authorized the payment of $2.6  million to the two tribes for damages and administrative expenses related  to the Fort Randall Dam. Regarding the Big Bend Dam, in 1962, the  Congress authorized the payment of about $7.7 million to the two tribes for  damages, rehabilitation (funds for improving the Indians’ standard of  living), and related administrative expenses. However, the tribes did not  consider the compensation they received in 1958 and 1962 to be sufficient,  and they sought additional compensation to address the effects of both  dams. As a result, in 1996 and 1997, the Congress authorized the Crow  Creek Sioux and Lower Brule Sioux tribes additional compensation of  $27.5 million and $39.3 million, respectively, through the establishment of  development trust funds for each tribe.
In addition to the Crow Creek Sioux and Lower Brule Sioux tribes, other  Indian tribes in North and South Dakota also (1) lost land to flood control  projects on the Missouri River, (2) received compensation for damages in  the mid-1900s, and (3) requested and received additional compensation in  the 1990s or early 2000s. In 1992, 2000, and 2002, the Congress authorized  the payment of additional compensation, through the establishment of  development trust funds, to Indian tribes at five other reservations for  damages suffered from dam projects along the Missouri River. Prior to the  Congress authorizing additional compensation to Indian tribes at three— Fort Berthold, Standing Rock, and Cheyenne River—of these five other  reservations, we were asked to review their additional compensation  claims. In 1991, we reported on the additional compensation claims for the  Three Affiliated Tribes of the Fort Berthold Reservation and the Standing  Rock Sioux tribe, and, in 1998, we reported on the additional compensation  claims for the Cheyenne River Sioux tribe. For the tribes at these three  reservations, we found the economic analyses used to justify their  additional compensation claims to be unreliable, and we suggested that the  Congress not rely on them as a basis for providing the tribes with additional  compensation.
As an alternative, we suggested that if the Congress determined that  additional compensation was warranted, it could determine the amount of  compensation by calculating the difference between the tribe’s final  settlement proposal (referred to in this report as the tribe’s “final asking  price”) and the amount of compensation the Congress originally authorized  the tribes. We used the inflation rate and an interest rate to adjust the  difference to reflect a range of current values, using the inflation rate for  the lower end of the range and the interest rate for the higher end. Using  this approach, we calculated how much additional compensation it would  take today to make up for the difference between the tribes’ final asking  prices and the original compensation provided. The Congress authorized  additional compensation to the tribes of the Fort Berthold, Standing Rock,  and Cheyenne River Indian reservations that was within our suggested  range of additional compensation for each tribe.
We were not asked by the Congress to review the additional compensation  claims for the Crow Creek Sioux and Lower Brule Sioux tribes in the 1990s.  The Crow Creek Sioux and Lower Brule Sioux tribes did not base their  additional compensation claims in the 1990s on an economic analysis as  the tribes did for the three other reservations that we reviewed. Rather, the  Crow Creek Sioux and Lower Brule Sioux tribes’ consultant asserted that  since the tribes suffered the same type of damages as the Standing Rock  Sioux tribe, they should be provided with additional compensation  commensurate, on a per-acre basis, with the additional compensation  provided to the Standing Rock Sioux tribe in 1992.
After the Crow Creek Sioux and Lower Brule Sioux tribes received their  additional compensation in 1996 and 1997, respectively, the Congress  authorized additional compensation for the Cheyenne River Sioux tribe of  $290.7 million, or about $2,800 per acre of land flooded. In 2003, the Crow  Creek Sioux and Lower Brule Sioux tribes hired a consultant to determine  if they were due additional compensation based on the method we  proposed in our two prior reports. As a result of the consultant’s analysis,  the two tribes are currently seeking a third round of compensation totaling  an additional $226 million (in 2003 dollars) for the land and resources  flooded by the reservoirs created by the Fort Randall and Big Bend Dams.  The tribes assert that their new calculations for additional compensation,  using the alternative method we proposed in our two prior reports, will  bring them into parity with the additional compensation provided to the  other tribes on the Missouri River.
The additional compensation amounts the consultant recommended are  included in two bills pending in the 109th Congress, H.R. 109 and S. 374,  referred to as the Tribal Parity Act. Both the consultant’s analysis and the  bills state that the compensation amounts are based on methodology  deemed appropriate by GAO. However, in July 2005, we requested that this  language be deleted from the bills because we had not analyzed the  proposed additional compensation for these two tribes, as we had for the  other tribes. As a result, you asked us to assess whether the tribes’  consultant followed the approach in our prior reports in calculating the  additional compensation amounts for the Crow Creek Sioux and Lower  Brule Sioux tribes.
To assess the consultant’s methods and analysis for determining additional  compensation for the Crow Creek Sioux and Lower Brule Sioux tribes, we  used standard economic principles and the analysis we conducted in our  two prior reports on additional compensation. In order to ensure that we  obtained and reviewed all relevant data, we conducted a literature search  for congressional, agency, and tribal documents at the National Archives  and the Department of the Interior’s library. We used original documents to  learn about the negotiation process and to identify the appraised land  prices and various proposed settlement amounts. As a result, we  determined that the data were sufficiently reliable for purposes of this  report. We met with the tribes’ consultant to determine how he used the  method we had suggested the Congress use as the basis for granting  additional compensation to other tribes. We also met with representatives  of the two tribes on their reservations in South Dakota to (1) discuss the  analysis, actions taken with the compensation previously obtained, and  plans for the additional compensation amounts requested and (2) review  any records they might have on previous compensation negotiations. We  performed our work from October 2005 to April 2006 in accordance with  generally accepted government auditing standards. A more detailed  discussion of our scope and methodology is presented in appendix I.
subsections: section_title: Background
paragraphs: The Flood Control Act of 1944 established a comprehensive plan for flood  control and other purposes, such as hydroelectric power production, in the  Missouri River Basin. The Pick-Sloan Plan—a joint water development  program designed by the U.S. Army Corps of Engineers (the Corps) and the  Department of the Interior’s (Interior) Bureau of Reclamation—included  the construction of five dams on the Missouri River, including the Garrison  Dam in North Dakota and the Oahe, Fort Randall, Big Bend, and Gavins  Point Dams in South Dakota. The construction of the Fort Randall Dam,  located 7 miles above the Nebraska line in south-central South Dakota,  began in May 1946 and was officially dedicated in August 1956. The dam is  160 feet high, and the reservoir behind it, known as Lake Case, stretches  107 miles to the northwest. (See fig. 1.)
In September 1959, the Corps began work on the Big Bend Dam, which is  about 100 miles northwest of the Fort Randall Dam on land belonging to  both the Crow Creek Sioux and Lower Brule Sioux tribes. The Big Bend  Dam is 95 feet high and was completed in September 1966. The reservoir  behind the dam, known as Lake Sharpe, is 20 miles long. (See fig. 2.)
The Crow Creek Sioux and Lower Brule Sioux tribes reside on reservations  located across the Missouri River from one another in central South  Dakota. The Crow Creek reservation includes about 225,000 acres, 56  percent of which is owned by the tribe or individual Indians. According to  the 2000 Census, the Crow Creek reservation has 2,199 residents, with the  majority residing in the community of Fort Thompson. The Lower Brule  reservation includes about 226,000 acres, 60 percent of which is owned by  the tribe or individual Indians. According to the 2000 Census, the Lower  Brule reservation has 1,355 residents, including several hundred who reside  in the community of Lower Brule. Both reservations include some non- Indians, and both tribes have several hundred members who do not live on  the reservations. The major economic activities for both the Crow Creek  Sioux and Lower Brule Sioux tribes are cattle ranching and farming, and  both tribes provide guided hunting for fowl and other game. Each tribe also  operates a casino and a hotel. Both tribes are governed by a tribal council  under their respective tribal constitutions, and each tribal council is led by  a tribal chairman. The major employers on the reservations are the tribes,  the casinos, the Bureau of Indian Affairs, and the Indian Health Service. In  addition, the Lower Brule Sioux tribe provides employment through the  Lower Brule Farm Corporation, which is the nation’s number one popcorn  producer. See appendix II for a map of the Crow Creek and Lower Brule  reservations and the locations of the previously mentioned dams and  reservoirs.
The construction of the Fort Randall Dam caused the flooding of more than  17,000 acres of Crow Creek and Lower Brule reservation land and the  displacement of more than 100 tribal families. After these two tribes  sustained major damage from this project, the construction of the Big Bend  Dam inundated over 20,000 additional acres of their reservations. This  flooding displaced more families, some of whom had moved earlier as a  result of flooding from the Fort Randall Dam. (See table 1.) Flooding from  the installation of both dams resulted in the loss of valuable timber and  pasture and forced families to move to less desirable land, which affected  their way of life.
During the early 1950s, the Corps; Interior, through its Missouri River Basin  Investigations Unit (MRBI); and the tribes—represented through tribal  negotiating committees—developed their own estimates of the damages  caused by the Fort Randall Dam. Discussions and informal negotiating  conferences were held among the three parties in 1953 to try to arrive at  acceptable compensation for damages. At that point, the Fort Randall  Dam had been closed since July 1952 and portions of the reservations were  underwater. The MRBI’s appraisal of damages was about $398,000 for Crow  Creek and about $271,000 for Lower Brule, which was higher than the  Corps’ proposal. Both the MRBI appraisal and the Corps’ proposal were  substantially lower than the tribes’ settlement proposals, and the parties  were unable to reach settlement. The Corps planned to take the land by  condemnation, but in July 1954 decided against that action when the  Congress authorized and directed the Corps and Interior to jointly  negotiate separate settlements with the tribes. Meanwhile, the tribes  arranged to have settlement bills introduced in July 1954. These bills  requested $1.7 million for damages for the Crow Creek Sioux tribe and $2.5  million for damages for the Lower Brule Sioux tribe. Both of these bills also  contained requests for about $2.5 million each for rehabilitation funds.  The first formal negotiating conference was held among the parties in  November 1954, and further discussions continued over several more years  after the bills were introduced, but, again, the parties could not reach  settlement. In 1955, with negotiations stalled, the Corps requested and  obtained an official declaration of taking. The tribes—with their lands now  flooded—received funds based on the earlier MRBI appraisal figures, with  the understanding that negotiations for additional funds would continue.  The tribes continued to insist on receiving substantially higher  compensation amounts for damages, and additional funds for  rehabilitation, as part of the settlement. The amounts the tribes requested  for rehabilitation fluctuated in tribal settlement proposals between 1954  and 1957, but both the Corps and the MRBI maintained that rehabilitation  funding was not within the scope of the negotiations.
In March 1958, each tribe’s negotiating committee submitted new proposals  at compensation hearings for the Fort Randall Dam. The Crow Creek  Sioux tribe proposed compensation of about $2.2 million for damages and  administrative expenses related to the settlement, and the Lower Brule  Sioux tribe proposed compensation of about $1.8 million for damages and  administrative expenses. Neither proposal included funds for  rehabilitation because both tribes agreed with the government’s request to  wait to procure these funds in the Big Bend Dam compensation request. In  May 1958, bills were introduced in the Congress with amounts that were  less than the tribes had proposed through their negotiating committees,  with the amount for direct damages from Fort Randall Dam construction  being substantially reduced. According to House reports, both the tribes  and the Corps agreed to the amounts proposed for damages. Later that  summer, amendments to the bills reduced the amount for indirect damages  for both tribes. In September 1958, the Congress authorized a payment of  about $1.5 million to the Crow Creek Sioux tribe, and almost $1.1 million to  the Lower Brule Sioux tribe. See table 2 for a summary of selected  settlement proposals related to the Fort Randall Dam.
In contrast to the Fort Randall negotiations, the compensation for the  construction of the Big Bend Dam was granted quickly. In bills introduced  in March 1961, the Crow Creek Sioux tribe requested over $1 million for  damages and administrative expenses as a result of the Big Bend Dam  construction. The Lower Brule Sioux tribe requested close to $2.4 million  for damages, administrative expenses, and a new school. In addition, both  tribes requested the rehabilitation funds that had not been included in the  Fort Randall Dam settlement—that is, the Crow Creek Sioux tribe  requested more than $4 million and the Lower Brule Sioux tribe requested  about $2.7 million. In June 1961, the government and the tribes agreed to a  reduction in direct damages, while the tribes requested an increase to the  amount for indirect damages, bringing the total amount of compensation,  including rehabilitation, requested by the Crow Creek Sioux and Lower  Brule Sioux tribes to about $4.9 million for each tribe. In subsequent bills  over the next year, however, the Congress lowered indirect damages  considerably and dropped the amount requested for a new school for  Lower Brule. The amounts requested for administrative expenses and  rehabilitation were also reduced. In October 1962, the Congress authorized  a payment of $4.4 million to the Crow Creek Sioux tribe and about $3.3  million to the Lower Brule Sioux tribe. See table 3 for a summary of  selected settlement proposals related to the Big Bend Dam.
See appendixes III and IV for a timeline summary of the settlement  negotiations and compensation for the two dams for the Crow Creek Sioux  and Lower Brule Sioux tribes, respectively.
Tribes at five other reservations affected by flood control projects along the  Missouri River incurred losses ranging from about 600 acres to over  150,000 acres. These tribes received some compensation, primarily during  the 1950s, for the damages they sustained. However, beginning in the 1980s,  some of these tribes began requesting additional compensation. The  Congress responded to their requests by authorizing the establishment of  development trust funds. (See table 4.) The tribes at the Fort Berthold,  Standing Rock, and Cheyenne River reservations received compensation  within the ranges we had suggested the Congress consider in our reviews  of the tribes’ additional compensation claims. The ranges were based on  the current value of the difference between each tribes’ final asking price  and the amount that the Congress authorized. We were not asked to review  the additional compensation claims for the Crow Creek Sioux and Lower  Brule Sioux tribes in the 1990s or for the Santee Sioux and Yankton Sioux  tribes in 2002.
section_title: Consultant’s Compensation Analysis Differs from the Approach GAO Previously Used for Other Tribes
paragraphs: The Crow Creek Sioux and Lower Brule Sioux tribes’ consultant differed  from the approach we used in our prior reports. The consultant used a  variety of settlement proposals, instead of consistently using the tribes’  final asking prices, in calculating the difference between what the tribes  asked for and what the Congress authorized. As a result, the consultant’s  proposed compensation estimates are higher than if he had consistently  used the tribes’ final asking prices. In addition, the consultant provided  only the highest additional compensation value, rather than a range of  possible additional compensation from which the Congress could choose.
subsections: section_title: Consultant Used Various Settlement Proposals, Rather Than Consistently Using the Tribes’ Final Asking Prices
paragraphs: To arrive at an additional compensation estimate, the consultant did not  consistently use the tribes’ final asking prices when calculating the  difference between what the tribes asked for and what they finally  received. In determining possible additional compensation for the tribes at  the Fort Berthold and Standing Rock reservations in 1991, and the  Cheyenne River reservation in 1998, we used the tribes’ final asking prices  to calculate the difference between what the tribes asked for and what they  received. In our prior reports, we used the tribes’ final position because we  believed that it represented the most up-to-date and complete information,  and that their final position was more realistic than their initial asking  prices. In contrast, the consultant used figures from a variety of settlement  proposals—several of which were not the tribes’ final asking prices—to  estimate additional compensation for damages (including direct and  indirect damages), administrative expenses, and rehabilitation. As a result,  the consultant’s estimate of the tribes’ asking prices in the late 1950s and  early 1960s was about $7.7 million higher than it would have been if he had  consistently used the tribes’ final asking prices. Choosing which settlement  proposal to use to calculate the difference between what the tribe asked for  and what it finally received is critically important, because a small  numerical difference 50 years ago can result in a large difference today,  once it is adjusted to reflect more current values.
With respect to the Fort Randall Dam, the consultant used amounts from a  variety of settlement proposals for damages and administrative expenses.  To determine additional compensation, the consultant used a $2.2 million  settlement proposal by the Crow Creek Sioux tribe and a $2.6 million  settlement proposal by the Lower Brule Sioux tribe. (See table 5.) The  Crow Creek proposal was from May 1957, and was the same as the tribe’s  final asking price requested about 1 year later, in February 1958. However,  the Lower Brule proposal was from the first compensation bill introduced  in the Congress in July 1954, almost 4 years before the tribe’s final asking  price of about $1.8 million in March 1958-—a difference of more than  $850,000.
For the Big Bend Dam, the consultant also used amounts from different  settlement proposals for damages and administrative expenses. To  determine additional compensation, the consultant used amounts from  congressional bills introduced in March 1961 for direct damages, but used  amounts from proposed amendments to the bills in June 1961 for indirect  damages. The tribes’ asking prices from June 1961 can be considered their  final asking prices because the proposed amendments are the last evidence  of where the tribes requested specific compensation (indirect damages) or  agreed to a compensation amount (direct damages). The consultant would  have been more consistent had he used both the indirect and direct damage  settlement figures in the proposed amendments from June 1961, rather  than a mixture of these figures. As a result, the total amount for damages  the consultant used to calculate the difference between what the tribes  requested and what it finally received is about $427,000 (in 1961 dollars)  higher than if the tribes’ final asking prices from June 1961 had been used  consistently. (See table 6.)
Lastly, the consultant did not use the tribes’ final asking prices for the  rehabilitation component of the settlement payment. The consultant used a  $6.7 million rehabilitation figure that the Crow Creek Sioux tribe’s  negotiating committee proposed in May 1957 and a $6.3 million  rehabilitation figure that was proposed in congressional bills in 1955 and  1957 for the Lower Brule Sioux tribe. (See table 7.) Both of these figures  were developed during the negotiations for the Fort Randall Dam.  However, the tribes agreed in their February and March 1958 proposals— their final asking prices for the Fort Randall Dam—to defer consideration  of their rehabilitation proposals until after land acquisitions were made for  the construction of the Big Bend Dam. The Big Bend Dam’s installation  would once again result in the flooding of their lands. In our view, the  consultant should have used the final rehabilitation figures proposed by the  tribes in 1961—that is, $4 million for the Crow Creek Sioux tribe and $2.7  million for the Lower Brule Sioux tribe.
While rehabilitation was the largest component of the tribes’ settlement  proposals, we believe it should be considered separately from the  comparison for damages because rehabilitation was not directly related to  the damage caused by the dams. Funding for rehabilitation, which gained  support in the late-1940s, was meant to improve the tribes’ social and  economic development and prepare some of the tribes for the termination  of federal supervision. Funding for these rehabilitation programs came  from both the government and from the tribes themselves. From the late- 1940s through the early-1960s, the Congress considered several bills that  would have provided individual tribes with rehabilitation funding. For  example, between 1949 and 1950, the House passed seven bills for tribes  totaling more than $47 million in authorizations for rehabilitation funding,  and considered other bills, one of which would have provided $50 million  to several Sioux tribes, including Crow Creek and Lower Brule. Owing to  opposition from tribal groups, the termination policy began to lose support  with the Congress in the late 1950s, and rehabilitation funding for  individual tribes during this time was most often authorized by the  Congress in association with compensation bills for dam projects on the  Missouri River. However, the granting of rehabilitation funding for these  tribes was inconsistent. Some tribes did not receive rehabilitation funding  along with compensation for damages, while others did. (See table 8.)
section_title: Consultant Developed a Single Compensation Estimate for Each Tribe, Rather Than a Range of Estimates
paragraphs: In our two prior reports, we suggested that, for the tribes of Fort Berthold,  Standing Rock, and Cheyenne River, the Congress consider a range of  possible compensation based on the current value of the difference  between the final asking price of each tribe and the amount that it received.  In calculating the current value, we used two different rates to establish a  range of additional compensation. For the lower end of the range, we used  the inflation rate to estimate the amount the tribes would need to equal the  purchasing power of the difference. For the higher range, we used an  interest rate to estimate the amount the tribes might have earned if they  had invested the difference in Aaa corporate bonds as of the date of the  settlement. The consultant did not follow this approach when he  calculated the compensation estimates for the Crow Creek Sioux and  Lower Brule Sioux tribes. Instead, he used the corporate bond rate to  develop a single figure for each tribe, rather than a range.
The consultant justified using only the corporate bond rate to calculate the  compensation figures for the Crow Creek Sioux and Lower Brule Sioux  tribes by pointing out that the Congress authorized additional  compensation of $149.2 million for the tribes of Fort Berthold and $290.7  million for the Cheyenne River Sioux tribe in 1992 and 2000, respectively,  by using our estimates of the high end of the range for these tribes. The  consultant contended that if the Congress also uses the corporate bond  rate for the Crow Creek Sioux and Lower Brule Sioux tribes to determine  compensation, it would ensure parity with the amounts the tribes of Fort  Berthold and the Cheyenne River Sioux received. However, the Congress  has not always chosen to use the highest value in the ranges we estimated.  For example, in the case of the Standing Rock Sioux tribe, the Congress  chose to provide additional compensation of $90.6 million in 1992—an  amount closer to the lower end of the range we estimated.
section_title: Amounts Calculated by GAO Are Similar to the Amounts Received by the Tribes in the 1990s
paragraphs: Using the approach we followed in our prior reports, which was based on  the tribes’ final asking prices, we found that the additional compensation  the Crow Creek Sioux and Lower Brule Sioux tribes received in the 1990s  was either at the high end or above the range of possible additional  compensation. For both tribes, we calculated the difference between the  final asking prices and the compensation authorized in 1958 and 1962. We  then took the difference and adjusted it to account for the inflation rate and  the Aaa corporate bond rate through either 1996 or 1997 to produce a  possible range of additional compensation to compare it with the  additional compensation the Congress authorized for the tribes in 1996 and  1997. For the Crow Creek Sioux tribe, we estimated that the difference  adjusted to 1996 values for both dams would range from $6.5 million to  $21.4 million (see table 9), compared with the $27.5 million the Congress  authorized for the tribe in 1996. The $27.5 million in additional  compensation already authorized for the Crow Creek Sioux tribe is  therefore higher than the amount that we would have proposed in 1996  using our approach.
For the Lower Brule Sioux tribe, we estimated that the difference adjusted  to 1997 values for both dams would range from $12.2 million to $40.9  million (see table 10), compared with the $39.3 million the Congress  authorized for the tribe in 1997. The $39.3 million falls toward the high end  of the range that we would have proposed in 1997 using our approach.
Our estimates of additional compensation for the two tribes vary  significantly from the amounts calculated by the tribes’ consultant. Our  estimated range for the two tribes combined is from about $18.7 million to  $62.3 million. The consultant calculated an additional compensation figure  for the two tribes of $292.3 million (in 2003 dollars)—that is, $105.9 for the  Crow Creek Sioux tribe and $186.4 for the Lower Brule Sioux tribe—before  subtracting the amounts received by the tribes in 1996 and 1997,  respectively. There are two primary reasons for the difference between our  additional compensation amounts and the consultant’s amounts.
First, most of the difference is due to the different rehabilitation cost  figures that were used. For the difference between the tribes’ asking  prices for rehabilitation and the amounts they actually received, we  used $901,450 and the consultant used about $7.3 million (in 1961 and  1957 dollars, respectively). Once the $901,450 is adjusted to account for  inflation and interest earned through 1996 and 1997, it results in a range  of additional compensation for rehabilitation for the two tribes  combined of about $4.8 million to $15.1 million. If the consultant’s  rehabilitation figure of about $7.3 million is adjusted through 1996 and  1997, his total for the two tribes is $120.9 million, or more than $105  million above our high estimate.
Second, our dollar values were adjusted to account for inflation and  interest earned only through 1996 and 1997 to compare them with what  the two tribes received in additional compensation at that time. The  consultant, however, adjusted for interest earned up through 2003. In  addition, he then incorrectly adjusted for the additional compensation  the tribes were authorized in the 1990s. Specifically, the consultant  subtracted the $27.5 million and $39.3 million authorized for the Crow  Creek Sioux and Lower Brule Sioux tribes in 1996 and 1997,  respectively, from his additional compensation totals without first  making the different estimates comparable. Since these amounts were  in 1996 and 1997 dollar values, versus the 2003 dollar values for his  current calculations, it was incorrect to subtract one from the other  without any adjustment. In our view, the consultant should have  adjusted his current calculations through 1996 and 1997, depending on  the tribe, and then should have subtracted the additional compensation  provided the tribes at that time. If there was any remaining  compensation due the tribes, the final step then would have been to  adjust it to reflect 2003 dollar values. Using this approach, the additional  compensation provided to the tribes in the 1990s would have been  subtracted from comparable dollar values.
section_title: Observations
paragraphs: The additional compensation already authorized for the Crow Creek Sioux  and Lower Brule Sioux tribes in 1996 and 1997, respectively, is consistent  with the additional compensation authorized for the other tribes on the  Missouri River. Rather than bringing the Crow Creek Sioux and Lower  Brule Sioux tribes into parity with the other tribes, the two bills under  consideration in the 109th Congress—H.R. 109 and S. 374—would have the  opposite effect. Providing a third round of compensation to the Crow  Creek Sioux and Lower Brule Sioux tribes, in the amounts proposed in the  bills, would catapult them ahead of the other tribes and set a precedent for  the other tribes to seek a third round of compensation. Our analysis does  not support the additional compensation amounts contained in H.R. 109  and S. 374. Notwithstanding the results of our analysis, the Congress will  ultimately decide whether additional compensation should be provided  and, if so, how much it should be. Our analysis will assist the Congress in  this regard.
section_title: Consultant’s Comments and Our Evaluation
paragraphs: Because the consultant’s analysis was the basis for the tribes’ additional  compensation claims and the consultant had asserted that the additional  compensation amounts were based on a methodology deemed appropriate  by GAO, we chose to provide the tribes’ consultant with a draft of this  report for review and comment. In commenting on the draft, the tribes’  consultant (1) acknowledged that he had made a calculation error in his  analysis, (2) proposed a range of additional compensation based on four  different alternatives, and (3) discussed the complex issues of “asking  price” in the context of the particular set of facts for the Crow Creek Sioux  and Lower Brule Sioux tribes. In addition, the consultant commented  “…that there has been no uniform or consistent approach, method,  formula, or criteria for providing additional compensation. . .” to the seven  tribes affected by Pick-Sloan dam projects on the Missouri River.  Specifically, the consultant pointed out that the Congress has provided  additional compensation to four tribes based on a per-acre analysis, while  only three tribes have received additional compensation within the ranges  we calculated in our two prior reports. As a result, the consultant believes  that there is a wide disparity in the total compensation that the seven tribes  have received from the Congress. As discussed in detail below, we believe  that our approach is reasonable, and we did not make any changes to the  report based on the consultant’s comments. The tribes’ consultant provided  written comments that are included in appendix V, along with our specific  responses.
To address the perceived disparity in the total compensation amounts  provided by the Congress, the consultant proposed four different  alternatives for calculating additional compensation for the Crow Creek  Sioux and Lower Brule Sioux tribes: (1) on a per-acre basis compared with  the Cheyenne River Sioux tribe, (2) the consultant’s original proposal  (amended to correct for the calculation error), (3) on a per-acre basis  compared with the Santee Sioux tribe, and (4) calculations based on using  the tribes’ highest asking prices. We do not believe that the consultant’s  amended original proposal nor the three new alternatives represent a  sound approach for establishing the range of additional compensation. Our  approach is to provide the Congress with a range of possible additional  compensation based on the difference between the amount the tribes  believed was warranted at the time of the taking and the final settlement  amount. We then adjusted the differences using the inflation rate for the  lower end of the range and the corporate bond rate for the higher end. The  ranges of additional compensation we calculated in this report were  calculated in exactly the same way we did in our 1991 and 1998 reports, and  we believe our approach is reasonable. In our view, trying to compare the  total compensation for the tribes on a per-acre basis—which are two of  consultant’s proposed alternatives—does not take into account the  differences of what each tribe lost. For example, even if the individual  resources such as timber, wildlife, and wild products would have all been  valued the same for all of the tribes, if one tribe lost more of one resource  than another, then their per-acre compensation values would be different.  Also, about half of the payments to four of the tribes were for  rehabilitation, which had no direct correlation to the acreage flooded by  the dams, and the consultant did not make the different dollar amounts  comparable before performing his per-acre calculations.
The tribes’ consultant disagreed with our assumption that the tribes’ final  asking prices were based on the most up-to-date and complete information  and that they were more realistic than their initial asking prices.  Specifically, the consultant noted that the tribes’ final asking prices “were  made under conditions of extreme duress.” We agree with the consultant  that the tribes were not willing sellers of their land at the initial price that  the government offered for their land. However, we disagree that this factor  invalidates the use of the tribes’ final asking prices. The drawn out  negotiations for the Fort Randall Dam and the amounts of the tribes’ final  asking prices do not support the conclusion that the tribes simply  capitulated and accepted whatever the government offered. For example,  for 12 of the 15 compensation components shown in tables 5, 6, and 7 of  our report, the tribes’ final asking prices were equal to, or higher than, their  initial settlement proposals. We used a clearly defined and consistent  approach, whereas, in his analysis, the consultant selected only certain  numbers from a variety of tribal settlement proposals without providing  any justification. While the tribes’ consultant chose to use the Crow Creek  Sioux tribes’ offer from May 1957, he did not use the Lower Brule Sioux  tribes’ offer from the same time. Instead, the consultant chose to use the  Lower Brule Sioux tribes’ initial offer from 3 years earlier—July 1954— without any explanation. Furthermore, rather than consistently using the  Lower Brule Sioux tribes’ July 1954 offer, the consultant used the tribes’  rehabilitation offer from April 1957, again without any explanation.
The tribes’ consultant correctly points out that only three of the seven  tribes have received additional compensation consistent with the ranges  calculated in our two prior reports. Until this report, the Congress had only  asked us to review these three tribes’ additional compensation requests,  and, each time, the Congress provided additional compensation within the  ranges we calculated. Furthermore, our two prior reports dealt with the  three highest tribal claims for additional compensation—all over $90  million—whereas, the four tribes that obtained additional compensation  based on a per-acre calculation were all less than $40 million, and we were  not asked to review those requests. As noted in this report, although the  additional compensation already provided to the tribes in 1996 and 1997  was calculated on a per-acre basis, by coincidence, for the Lower Brule  Sioux tribe it was within the range we would have proposed and for the  Crow Creek Sioux tribe it was above our range. As such, should the  Congress rely on our analysis in this report and not provide these two  tribes a third round of compensation, then the additional compensation  provided to five of the seven tribes would generally be within the ranges we  have calculated, leaving only two tribes that would have had their  additional compensation calculated based on a per-acre analysis and not  analyzed by GAO. Accordingly, we believe our approach would provide  more consistency among the tribes.
It is important to note that both the consultant’s analysis and the two bills  pending in the 109th Congress state that the additional compensation  amounts for the Crow Creek Sioux and Lower Brule Sioux tribes are based  on a methodology deemed appropriate by GAO. We do not believe our  analysis supports the additional compensation claims. We recognize that  compensation issues can be a sensitive, complex, and controversial.  Ultimately, it is up to the Congress to make a policy determination as to  whether additional compensation should be provided and, if so, how much  it should be. We amended our observations to reflect this reality.
We are sending copies of this report to interested congressional  committees, the Secretary of the Interior, the tribes’ consultant, the Crow  Creek Sioux and Lower Brule Sioux tribes, and other interested parties. We  will also make copies available to others upon request. In addition, the  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-3841 or nazzaror@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VI.
section_title: Scope and Methodology
paragraphs: To assess the consultant’s methods and analysis for determining additional  compensation for the Crow Creek Sioux and Lower Brule Sioux tribes as a  result of the flooding of 38,000 acres of their land and resources by the  installation of the Fort Randall and Big Bend Dams, we used standard  economic principles and the analysis we conducted in our two prior  reports on additional compensation. We met with the tribes’ consultant to  determine how he used the method that we suggested the Congress adopt  as the basis for granting additional compensation to other tribes and  reviewed additional information he provided on how he arrived at his  proposed compensation amounts.
In order to ensure that we obtained and reviewed all relevant data, we  conducted a literature search for congressional, agency, and tribal  documents at the National Archives and the Department of the Interior’s  (Interior) library. We used original documents to learn about the  negotiation process and to identify the appraised land prices and various  proposed settlement amounts. As a result, we determined that these data  were sufficiently reliable for purposes of this report. Specifically, from the  National Archives, we reviewed legislative files containing proposed House  and Senate bills, public laws enacted, House and Senate reports, and  hearings held on compensation for the tribes. In addition, from Interior’s  library, we obtained Missouri River Basin Investigations Unit documents to  review information on early damage estimates as a result of installation of  the Fort Randall Dam and on details regarding both informal and formal  negotiations between the federal government and the two tribes. We also  met with representatives of the two tribes on their reservations in South  Dakota to (1) discuss the analysis, the actions taken with the compensation  previously obtained, and plans for the additional compensation amounts  requested and (2) review any records they might have on earlier  compensation negotiations. The tribes, however, did not have any  documentation on tribal discussions or decisions regarding either  compensation negotiations or offers that took place in the 1950s and 1960s.
We performed our work from October 2005 to April 2006 in accordance  with generally accepted government auditing standards.
section_title: Map of Tribes and Dams on the Missouri River
section_title: Timeline of Settlement Negotiations and Compensation for the Crow Creek Sioux Tribe
paragraphs: January 4, February 14 Tribal Prity Act reintrodced as H.R. 109 nd S.
January 4, February 14 Tribal Prity Act reintrodced as H.R. 109 nd S.
The following are our comments on the Crow Creek Sioux and Lower Brule  Sioux tribes’ consultant’s letter dated April 27, 2006.
subsections: section_title: GAO Comments
paragraphs: 1. The tribes’ consultant did not calculate a range of additional  compensation as we suggested in our report. Our approach is to  provide the Congress with a range of possible additional compensation  based on the difference between the amounts the tribes believed was  warranted at the time of the taking and the final settlement amount. We  then adjusted the differences using the inflation rate for the lower end  of the range and the corporate bond rate for the higher end. In deciding  not to calculate a low-end value using the inflation rate, the consultant  stated that “…there is no precedent for Congress using the inflation  rate as a basis for any additional compensation it has awarded to the  seven Tribes since 1992.” While the consultant is correct in stating that  the Congress has not provided any tribe with additional compensation  at the lowest value in the ranges we have calculated, there is a  precedent for the Congress providing an amount less than the highest  value. In 1992, the Congress authorized $90.6 million in additional  compensation for the Standing Rock Sioux tribe, which was toward the  low end of the possible compensation range we calculated of $64.5  million to $170 million. Although the Congress did not select the lowest  value, having a lower value provided the Congress with a range from  which to select. We did not suggest that the consultant should propose  a range of additional compensation using four different approaches. 2. Determining whether additional compensation is warranted is a policy  decision for the Congress to decide. Nonetheless, if the Congress relies  on our analysis in this report and does not provide a third round of  compensation to the Crow Creek Sioux and Lower Brule Sioux tribes,  the additional compensation provided to five of the seven tribes—the  Cheyenne River Sioux tribe, the Crow Creek Sioux tribe, the Lower  Brule Sioux tribe, the Standing Rock Sioux tribe, and the Three  Affiliated Tribes of the Fort Berthold Reservation—would generally fall  within the ranges we calculated using our approach, thereby leaving  only two tribes—the Santee Sioux tribe and the Yankton Sioux tribe— that would have had their additional compensation calculated on a per- acre basis and not reviewed by GAO. As a result, we believe using our  approach, which is based on the amounts that the tribes believed were  warranted at the time of the taking, would provide more consistency  among the tribes, rather than less.  3. The tribes’ consultant did not make the amounts from different years  comparable before making his per-acre calculations. The consultant did  not adjust the original compensation amounts from 1947 through 1962  before adding them with the additional compensation amounts from  1992 through 2002. As a result, any comparisons made between the  compensation amounts of the Crow Creek Sioux and Lower Brule  Sioux tribes and other tribes, such as the Cheyenne River Sioux tribe or  the Santee Sioux tribe, would be inaccurate. For example, for the  Lower Brule Sioux tribe, the consultant added three amounts from  1958, 1962, and 1997 for a total of $43.6 million, without first adjusting  the individual amounts to constant dollars. More importantly, we do not  believe that an aggregate per-acre comparison among the tribes is  appropriate. We agree with the tribes’ consultant that the tribes all  suffered similar damages, but similar does not mean exactly the same.  Damages would have to be exactly the same among all tribes for there  to be equal total compensation on a per-acre basis, and this was not the  case. Products, such as buildings, timber, and wildlife, were valued  differently depending on type and some tribes lost more of one  resource than other tribes. As a result, their per-acre compensation  values would be different. Also, about half of the payments to four of  the tribes were for rehabilitation that was not directly linked to the  acreage flooded by the dams.  4. We disagree that the additional compensation authorized for the  Cheyenne River Sioux tribe in 2000 had a “skewing” effect on the  additional compensation provided to the four other tribes prior to that  time. The additional compensation authorized for the Cheyenne River  Sioux tribe fell within the range we calculated, as did the additional  compensation authorized for the Three Affiliated Tribes of the Fort  Berthold Reservation and the Standing Rock Sioux tribe. Our range was  based on the amount the Cheyenne Rive Sioux tribe believed was  warranted at the time of the taking. Furthermore, as our analysis in this  report demonstrates, although the Crow Creek Sioux and Lower Brule  Sioux tribes were provided with additional compensation in 1996 and  1997 based on a per-acre analysis, the amounts were consistent with, or  higher, than the ranges we calculated in this report. 5. As the tribes’ consultant noted in his comments, he did not use the  tribes’ highest offers in every case in his original analysis because he  believed that some of those offers, such as the $16 million rehabilitation  figure requested by the Lower Brule Sioux tribe, were skewed by  special circumstances. However, the consultant uses these same  highest asking prices in his fourth alternative, even though he believed  them to be too unreasonable to include in his original analysis. 6. The tribes’ consultant is correct in pointing out that we did not use the  exact phrase “final asking price” in our two prior reports. However, the  ranges we calculated in our 1991 and 1998 reports were based on the  final asking price of the tribes and their final settlements. We used the  phrase “at the time of the taking” as a general phrase to denote the time  period when the tribes’ were negotiating with the government for  compensation for the damages caused by the dams. It is not intended to  refer to a specific date. 7. We disagree with the tribes’ consultant that tribal members were forced  to relocate without funds for moving expenses. The tribes did receive  initial funds based on the Missouri River Basin Investigations Unit  appraisals to help cover relocation expenses 3 years before they made  what we refer to as their final asking prices in March 1958. In March  1955, the Crow Creek Sioux tribe received $399,313 and the Lower  Brule Sioux tribe received $270,611 from the court, with the  understanding that negotiations between the tribes, the U.S. Army  Corps of Engineers, and Interior would continue until settlements were  achieved. Tribal committees were formed to plan relocation activities  with these funds.  8. We disagree with the tribes’ consultant regarding his characterization  of the rehabilitation portion of the payment the tribes received. We  state in this report that it should be considered separately from the  comparison of the dams because it was not directly related to the  damage caused by the dams. The tribes’ consultant states that “…the  Congress has consistently demonstrated the understanding that funds  for rehabilitation were directly linked to the damages caused by the  dams.” We agree that funding for rehabilitation became intertwined  with compensation for the dams, and we included rehabilitation in our  analysis in this report, as shown in tables 9 and 10, as we did for the  Cheyenne River Sioux tribe and the Standing Rock Sioux tribe.  However, we disagree that rehabilitation is directly linked to the  damages caused by the dams for the following three reasons. First,  other tribes not affected by dam projects were also provided with  rehabilitation funding. Second, rehabilitation funding was to improve  the economic and social conditions of all tribal members, it was not  limited to only those members directly affected by the dams. Third, it  was clear during the negotiations that the government did not consider  rehabilitation funding to be compensation for the damages caused by  the dams. In addition, in this report, as in our 1998 report, we show the  breakout of each component in our analysis to provide the Congress  with the most complete information.
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Jeffery D. Malcolm, Assistant  Director; Greg Carroll; Timothy J. Guinane; Susanna Kuebler; and Carol  Herrnstadt Shulman made key contributions to this report.  Also  contributing to the report were Omari Norman, Kim Raheb, and Jena Y.  Sinkfield.