Indians' Additional Compensation Claims: Calculations for the Crow Creek Sioux and Lower Brule Sioux Tribes Differ from Approach Used in Prior GAO Reports
Released: 2006-06-14T00:00:00

Letter

Background

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. Each reservation includes about 225,000 acres. 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.

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 1950s and 1960s, 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 and Big Bend 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 counter-proposals. See table 2 for summary of the tribes’ initial settlement proposals and final asking prices for both dams.

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 3.) 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.

Consultant’s Compensation Analysis Differs from the Approach GAO Previously Used for Other Tribes

The approach used by 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.

Consultant Used Various Settlement Proposals Rather Than Consistently Using the Tribes’ Final Asking Prices

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 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 4.) 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 when 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), which is higher than if the tribes’ final asking prices from June 1961 had been used consistently. (See table 5.)

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 6.) 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.

During the settlement negotiations for the two dams, the tribes never submitted a settlement proposal at a singular point in time that consisted of the settlement figures that the tribes’ consultant grouped together for the purposes of his calculations.

Consultant Developed a Single Compensation Estimate for Each Tribe, Rather Than a Range of Estimates

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.

Amounts Calculated by GAO Are Similar to the Amounts Received by the Tribes in the 1990s

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 7), 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 8), 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 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.

In conclusion, 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. 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 affected by Pick-Sloan dam projects on the Missouri River would generally be within the ranges we have calculated. (See fig. 3.) Accordingly, we believe our approach would provide more consistency among the tribes.

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 or not additional compensation should be provided, and if so, how much it should be. Our analysis will assist the Congress in this regard.

Mr. Chairman, this completes my prepared statement. I would be happy to respond to any questions you or other Members of the Committee may have at this time.

Contact and Acknowledgments

For further information, please contact Robin M. Nazzaro on (202) 512- 3841 or nazzaror@gao.gov. Individuals making key contributions to this testimony and the report on which it was based are Greg Carroll, Timothy J. Guinane, Susanna Kuebler, Jeffery D. Malcolm, and Carol Herrnstadt Shulman.

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