1

The Tribal Leasing Regime

TRUE COMMERCIAL INTEREST in Northern Cheyenne coal began in December 1965, when a geologist from Laramie, Wyoming, named Max Krueger submitted the first formal proposal to develop the reservation. A consultant for the Big Horn Coal Company, Krueger sought an exclusive two-year prospecting permit to explore the entire 440,000-acre reservation. At the coal company’s discretion, the permit could be renewed for an additional two years, during which time the parties could negotiate the specific terms of a lease to extract any coal found. Krueger suggested 10 cents per ton as a fair royalty to mine Cheyenne coal. Big Horn was very clear, however, that it did not intend to develop the reservation immediately. According to Bureau of Indian Affairs (BIA) staff who followed up on the proposal with company officials, they were given the distinct “impression that [Big Horn was] interested in holding reservation coal in reserve for development sometime in the future.” In these early days of coal prospecting along the Northern Plains, the coal company planned to sit on Cheyenne mineral rights until market conditions improved.1

Despite the vague terms and uncertainty of future development, federal officials could barely conceal their excitement. Immediately upon receiving Krueger’s offer, the BIA’s superintendent of the Northern Cheyenne Reservation, John Artichoker, wrote to his Billings, Montana, supervisor, gushing that “the prospect of developing the coal resource on this reservation is an exciting one as this for some time has appeared to be the reservation’s ‘white elephant.’” Artichoker’s boss, BIA Area Director James Canan, and his staff were equally delighted, although they proceeded with more caution. Questioning the sufficiency of Krueger’s proposal to mine the entire reservation for a mere 10 cents per ton royalty, these officials noted other interest being generated for similar coal in the region and feared selling Northern Cheyenne minerals for less than market value. The issue, they surmised, was not whether to develop Cheyenne coal—that was a given considering the dire reservation poverty. The only question was how to determine a fair price in the unproven western coal market. Working without sufficient geological or market data, Billings officials concluded that to determine a truly equitable value they must conduct a competitive auction for the right to prospect Cheyenne coal.2

INDIAN (IN)CAPACITY

Relying on market forces to establish a fair coal price sprang from two unique provisions of federal Indian law—one a broad principle, the other a specific statute. The first was the federal government’s general trustee duty, which the Supreme Court has affirmed repeatedly as “one of the cornerstones of Indian law.” This duty requires federal officials to manage American Indian land and resources as any private fiduciary would, ensuring responsible development in order to meet Indian, not private or public, needs. First articulated by Chief Justice John Marshall in a series of early nineteenth-century cases, the trust doctrine developed as a way to balance the United States’ superior title to Indian lands with the acknowledgment that Indians possessed some property rights to territory they had possessed since “time immemorial.” Marshall resolved this tension by reasoning that tribes’ status as “domestic dependent nation[s] . . . in a state of pupilage” placed this special trust responsibility upon the United States. The federal government interpreted the duty liberally during the nineteenth and early twentieth centuries to justify the broad disposition of Indian property into non-Indian hands, but over the course of the twentieth century courts had become increasingly willing to hold executive agencies to “the most exacting fiduciary standards” when managing tribal resources.³

Securing the highest possible return for reservation resources was the key to fulfilling the BIA’s trustee duty to the Northern Cheyenne. Economic development was the agency’s singular concern, but in pursuing this goal federal officials faced the challenge of appropriately pricing Northern Cheyenne minerals. They needed to make the terms of any reservation coal sale attractive enough to draw developers but not short-sell the tribe and fail to meet their trustee obligations. With little information about the geology of the Northern Cheyenne Reservation or contemporary western coal prices, federal agents determined to let market forces establish coal values. As BIA Area Director Canan would later recall, “Everything we did was based on a competitive assumption.”4 With the market setting a price, federal officials felt assured their trustee duty would be met.

The second aspect of federal Indian law guiding BIA actions was the 1938 Indian Mineral Leasing Act, which gave federal officials the authority to decide the fate of Indian minerals. Dating back to the 1790 Non-Intercourse Act, Congress had prohibited tribes from transferring interests in real property without its express consent. This meant, in theory, that the only way Indian property—including resource rights—could legally change hands was through a congressionally created process overseen by federal officials. Under the guise of protecting unsophisticated “savages” from encroaching white settlers, early nineteenth-century laws had authorized unilateral transfers of Indian lands to non-Indians, facilitating the removal of tribal communities west of the Mississippi. By the 1870s, the justification for appropriating Indian land had shifted toward assimilating Native Americans into the national mainstream, but the result was much the same. Working in tandem with a liberal reading of the trustee duty, federal officials continued to dispose of Indian property without tribal input.⁵

The “Indian New Deal” of the 1930s, however, substantially altered this practice. Crafted by John Collier, Franklin Roosevelt’s commissioner of Indian Affairs, the new approach halted disastrous federal land policies, such as allotting communal land to individual tribal members, and helped establish tribal governments to provide tribal control over tribal property. The centerpiece of Collier’s new regime was the 1934 Indian Reorganization Act, though the lesser known 1938 Indian Mineral Leasing Act governed the disposition of tribal minerals. Both statutes promised indigenous control over communal property, but, as we will see, that promise was never kept. Well into the 1960s, the BIA, not the Northern Cheyenne, was still deciding what to do with the tribe’s coal.6

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Only during the heady, experimental days of the New Deal could a man like John Collier preside over federal Indian policy. The son of a former Atlanta mayor and grandson of one of the city’s founders, this Progressive crusader spent his early adulthood as a community organizer in New York’s immigrant communities before following a twisted path to Taos, New Mexico. There he encountered the elaborate rituals of the Pueblo Indians and saw in them a “Red Atlantis” that needed protection from the outside world’s corrupting influence. His desire to save what he believed to be a communalistic, gemeinschaft mode of living, however, stemmed not simply out of concern for the Pueblos, though he certainly feared for their future. More than that, Collier believed the Pueblos and other tribal communities could offer vital lessons in living to an American society spiritually bankrupted by the profit-driven, individualistic pursuit of prosperity. Animated by this idealistic crusade, Collier spent much of the 1920s expanding his mission to other tribes, forming the American Indian Defense Association and carrying with him a monolithic understanding of Indian culture forged through his Pueblo experience. When Franklin Delano Roosevelt assumed the presidency in 1933, Collier was tapped to head Indian Affairs. In one of the more stunning reversals in the history of the federal bureaucracy, the preeminent critic of federal Indian policy over the previous decade was now in charge of the shop.⁷

Collier, the crusader, assumed his position determined to overhaul federal Indian policy and protect Native communities. By the end of his first year in office, he began work on a major piece of legislation to renounce the federal policy of assimilation and end the practice of allotting communal reservations. These radical redirections of federal policy, however, would be the easy, first steps. The new commissioner understood that tribes could not survive without healthy reservation economies, and therein lay his largest dilemma. It was one thing to eliminate threats to indigenous culture and the tribal land base; it was quite another to figure out how Indians could engage with the surrounding economy to provide revenue without threatening the communal values Collier so valued.

Ever the Progressive, Collier intended to use the expertise of the federal government to help tribes negotiate this difficult balance. He envisioned a process whereby indigenous groups would establish formal governing bodies to collectively manage communal land, while government officials remained active to guide tribes through the process of self-government and ensure that these groups exercised their powers appropriately. Moreover, because Collier believed, as most did, that Native Americans were unprepared to engage in the cutthroat world of industrial capitalism, BIA staff would continue to provide “technical assistance” to the new tribal bodies, essentially acting as intermediaries between tribes and commercial interests. Such a system would provide Indians with a tribal mechanism to capitalize on their resources and, in theory, check the previously unlimited power of federal officials to dispense with tribal property. It also positioned federal trustees to ensure reservations would not be opened to the nefarious practices that had exploited these lands in the past. Collier called the approach “indirect administration.” It was an altruistic yet ultimately paternalistic project.8

John Collier had the drive and vision to reformulate federal Indian policy, but the process of transforming his ideas into actual legislation revealed deep tensions within the Department of the Interior over the appropriate level of tribal autonomy. The fault line in this debate ran between Collier and a young lawyer from the department’s Solicitor’s Office named Felix Cohen, who had been conscripted to help write the Indian New Deal’s cornerstone legislation, the Indian Reorganization Act. The son of Morris Cohen, the renowned philosopher and advocate of multiculturalism, the younger Cohen complimented his Columbia law degree with a PhD in philosophy from Harvard, bringing to his legal work a clear vision for how laws should be structured to protect and empower minority groups. According to his biographer, Felix Cohen espoused a strand of legal realism known as “legal pluralism,” which argued that America should be organized not as a nation of individuals in pursuit of their own self-interests, but as a collection of independent groups through which individuals attach their identity and pursue collective goals. This normative vision for how society should operate supported Cohen’s affinity for laws that decentralized state power and increased group autonomy so that these organizations could regulate their own internal affairs. Only by structuring society as a collection of special interest groups did Cohen believe “disparities of power, particularly economic power, could be minimized if not eliminated.” To neutralize any relativistic implications of this group-based, egalitarian legal structure, the young philosopher-attorney also preserved a governmental role to ensure “group power should be exercised to benefit the society at large.” As applied to American Indian law, legal pluralism meant the federal government was needed to ensure tribes did not infringe upon the rights of other groups and that their collective pursuit was for the common good. But within tribal communities, the state must respect tribal sovereignty.9

John Collier and his staff at the Bureau of Indian Affairs, however, pursued a more limited agenda. Collier envisioned a much closer federal-tribal relationship, at least initially, with the BIA carefully guiding the tribes toward self-government. In this role, federal agents would remain involved in tribal affairs to help draft constitutions, issue tribal business charters that outlined the extent of tribal powers, and negotiate with non-Indian developers to provide a material basis for survival without sacrificing cultural values.

The Department of the Interior’s legislative proposal for the Indian Reorganization Act reflected this tug-of-war between Collier’s and Cohen’s visions of tribal sovereignty. The cumbersome and contradictory forty-eight-page bill authorized tribes “to organize for the purpose of local self-government and economic enterprise,” listing dozens of possible government powers the tribes could wield. It retained for the federal government, however, the authority to define the scope of these powers through the issuance of corporate charters. The bill also ended the policy of assimilation through land allotments, but it imposed severe restrictions on what tribes could do with their remaining lands without federal approval. In short, Interior’s proposal was Janus-faced, recognizing the need for Indian control over a self-sufficient land base in one breath yet retaining federal authority to meddle in Indian affairs with the next. It represented a process of conflict avoidance within the department, rather than one of compromise.¹⁰

Ultimately, Congress settled this internal agency dispute, but in doing so it opened a window for Cohen’s expansive reading of tribal authority to take hold. After months of deliberations, hearings, and numerous tribal conferences held to elicit Indian input, Congress slashed Interior’s forty-eight-page proposal to a mere five pages. The final Indian Reorganization Act replaced the laundry list of possible tribal powers with three specific grants: the authority to hire attorneys; the ability to prevent the disposal of communal land without tribal consent; and the right to negotiate with federal, state, and local governments. In addition to these enumerated powers, Congress included boilerplate language recognizing that tribes organized under the statute retained “all powers vested . . . by existing law.” This phrase, which was most certainly intended to ensure only that the act did not unwittingly extinguish any well-established rights, provided Felix Cohen with the opportunity to redefine the nature of tribal sovereignty. In a Solicitor’s Opinion entitled “Powers of the Indian Tribes” issued four months after the Indian Reorganization Act became law, Cohen made the radical argument that those tribal powers vested by existing law “are not, in general, delegated powers granted by express acts of Congress, but rather inherent powers of a limited sovereignty which has never been extinguished.” Although not a novel theory—Chief Justice John Marshall had articulated a similar principle a century earlier—Cohen’s explanation of the source of tribal power was revolutionary for its time. Because tribal powers did not originate in grants from Congress but were inherent in the tribes’ status as aboriginal sovereigns, Cohen reasoned that tribes retained all powers normally vested in sovereigns, unless they had been explicitly extinguished by the federal government. These powers included the right to choose their own form of government, to determine tribal membership, to regulate all internal relations, and most important, to determine the use and disposition of tribal property. As Vine Deloria, Jr., and Clifford Lytle point out, since Congress had probably never considered that tribes possessed powers not expressly granted to them, the list of those powers not specifically limited could be fairly long.11

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This principle of inherent tribal sovereignty laid the foundation for the rest of Cohen’s work at the Department of the Interior and would continue to animate debates between Cohen and his allies in the Solicitor’s Office and Collier’s Bureau of Indian Affairs.¹² These conflicts were particularly fierce over the issue of reservation mineral development, which both camps saw as a potential base of prosperity if only the confusing and conflicting laws governing these resources could be clarified. Beginning in the summer of 1933, the Bureau of Indian Affairs thus began work on a uniform, systematic process for developing these resources. Consistent with Collier’s cautious views of tribal capacity, this paternalistic plan proposed a system whereby the federal government would issue mineral leases on behalf of the tribes, subject to tribal consent only on the final terms. These leases would authorize outside companies to mine reservation resources, but they would not empower tribes to mine and sell the minerals themselves. Moreover, the BIA would retain authority to unilaterally grant prospecting permits, renew leases, and release lessees from their contractual obligations should conditions warrant it.13

Landing on Felix Cohen’s desk in January 1935, the BIA’s proposal was dead on arrival. In a fiery retort to Collier, drafted for Solicitor General Nathan Margold’s signature, Cohen blasted the bureau for “contemplat[ing] a very serious diminution of the existing rights of those tribes that still have some mineral resources” and admonished the agency for failing to include “any basis for this sudden change of legislative policy.” Cohen’s draft rebuke was so emphatic that it launched a debate within the Solicitor’s Office over that institution’s role in the legislative drafting process. Assistant Secretary Rufus Poole intervened with a strongly worded memo to Margold questioning Cohen’s tone and arguing that the proper response should have been merely to point out the proposed bill’s effects on existing law, not to suggest policy. Picking his fights carefully, Cohen relented. But while he graciously softened the tone of his memo to Collier, the new draft retained all the substantive criticisms.¹⁴

Soon after Cohen’s revised memo reached Collier’s desk, the young attorney and BIA staff began cooperating on new legislation. The amended bill retained the lease form as the singular method of reservation mineral development but placed authority to issue leases with the tribes, not the federal government. This proposal, transmitted to Congress on April 15, 1935, also expressly reaffirmed all tribal powers recognized by the Indian Reorganization Act—as elucidated in Cohen’s Solicitor’s Opinion—and repealed any previous statutes inconsistent with this expansive view of tribal sovereignty. It included, however, language allowing the secretary of the Interior to veto any lease deemed inconsistent with the tribes’ best interest. On one hand, then, the revised bill reflected Cohen’s insistence that authority to issue mineral leases rested with the tribes, but, on the other, it included Collier’s desire to carefully monitor tribal relations with outside developers so as to protect indigenous communities. Moreover, the proposal said nothing of methods other than leases to dispense with Indian minerals, including the possibility of tribes developing their resources themselves. This omission would prove costly for tribal governments in the 1960s and 1970s. As Native Americans learned the value of their vast mineral deposits and sought to control their development, federal officials claimed reservation resources could be extracted only through leases issued to outside mining firms, pursuant to the 1938 Indian Mineral Leasing Act.15

Although Cohen and Collier may have reached a compromise that met Cohen’s demand for tribes to decide the fate of their own minerals while preserving Collier’s desire for government oversight, lawmakers clearly mistook the proposed legislation as an expansion of federal authority alone. The bill’s sponsor, Senator Elmer Thomas (D-Okla.), explained to his colleagues on the Senate floor that the law was needed to “give the Secretary of the Interior power to lease unallotted Indian lands for different purposes,” which, of course, was the exact opposite of Cohen’s intent to give this authority to the tribes. In the House, the bill was equally misconstrued as a noncontroversial enlargement of Interior’s powers, and it passed on that body’s consent calendar without debate. Such a misinterpretation was understandable considering senior officials within the Interior Department continued to push legislation that, in the words of Assistant Secretary Frederick Wiener, would “protect the Indians against themselves, in view of their marked incompetence in money matters.” In fact, granting tribes unsupervised government powers, such as the authority to dispense with real property, Wiener argued, amounted to a flawed policy “representing a triumph of hope over experience.” With a confused Congress and a divided Department of the Interior, on May 11, 1938, President Roosevelt signed into law the Indian Mineral Leasing Act.¹⁶

On its face, the 1938 act recognized tribes’ inherent right to issue mineral leases but then circumscribed that power with federal veto authority. As we will see, federal officials charged with ensuring that leases conformed to tribal interests would fail to construct a triballed leasing process whereby tribal governments could cultivate skills and knowledge to make their own development decisions. Instead, the BIA would model the leasing program on a flawed regulatory regime designed for public minerals, where federal, not tribal, officials solicited bids for Indian resource development, evaluated those bids, and made recommendations to tribal governments. Unfortunately, federal officials were completely unprepared to carry out these tasks, and uninformed and impoverished tribes were in no position to critically evaluate BIA recommendations. Flawed federal oversight, not expanded tribal sovereignty, would become the tribal leasing program’s primary characteristic.

A BROKEN TEMPLATE

At the turn of the twentieth century, mineral development on federal lands was lightly regulated and characterized by wasteful production practices, and it succeeded mostly in transforming public resources into private wealth. Mid-nineteenth-century gold and silver strikes in newly acquired western territories had spurred some federal legislation, but these early laws generally encoded mining camp practices that regarded public lands as “free and open to exploration and occupation by all citizens.” Both the 1866 and 1872 General Mining Acts established the principle, adopted from Spanish colonial law, that the first to locate and make a valid claim on public minerals obtained ownership over them. Recognizing the importance of coal to the nation’s industrial economy, Congress attempted to limit the practice of free public entry for lands containing this valuable fuel source, but these restrictions were easily bypassed, and no limitations were placed on other energy minerals. By 1912, private developers operating on public lands were producing annually 58 million tons of coal and 141 million barrels of oil, all without paying for the right to do so. In the words of historian Samuel Hays, the entire regime was premised on “promot[ing] rapid disposal to private individuals rather than to aid in systematic development” of the nation’s resources.17

Beginning with Theodore Roosevelt’s presidency, however, federal officials began to question the wisdom of the existing regulatory regime, especially with respect to fuel minerals. This reexamination of federal mining laws was part of a larger Progressive critique of nineteenth-century land policies that encouraged the quick but inefficient development of public resources to benefit large companies rather than common citizens. In 1904, following a report by the Public Lands Commission, President Roosevelt proposed a new mineral development regime whereby the federal government would retain ownership over fuel minerals and lease the rights to developers for a per-ton royalty. Such an arrangement would maintain federal regulatory authority over minerals, allowing officials to ensure that development proceeded in a manner consistent with the public interest. Although endorsed by a growing cadre of scientific conservationists within the federal bureaucracy, led by Gifford Pinchot, Roosevelt’s leasing plan faced stiff opposition from western mining interests. It was not until after World War I, as the country turned again to developing its public resources, that Congress passed the 1920 Mineral Leasing Act. The law required federal officials to first survey and catalog lands containing valuable fuel and fertilizer minerals before deciding whether it was in the public’s interest to lease additional resources.18

Apparently, federal officials believed that what was good for public minerals could apply equally well to tribal resources. When drafting the bill that would become the Indian Mineral Leasing Act, the BIA simply adopted this public minerals leasing template and shared their legislative drafts with the U.S. Geological Survey to ensure consistency. In fact, in passing along the BIA’s earliest draft, the assistant solicitor of the Interior, Charles Lahy, explained his agency’s desire that “the procedure suggested by the Indian Office should as nearly as possible conform to the policy of the Department [of the Interior] relating to public land.” Lahy requested a memorandum from the Geological Survey highlighting any potential conflicts between the public leasing program and the proposed tribal leasing legislation and then unequivocally reemphasized his point: “It is desired that any policy now adopted or continued with reference to leases on Indian lands have in mind the policy governing permits and leases on the public lands.” Once this leasing framework was adopted for tribal resources, it never changed throughout the drafting process. Cohen and Collier may have battled over who should have the authority to issue leases, but no one questioned the leasing approach. After passage of the Indian Mineral Leasing Act, federal officials charged with implementing it then simply followed the procedures used for public minerals, determining to open Indian reservations to mining when they believed it to be in the tribes’ best interests.19

In theory, the new regulatory regime governing both public and tribal minerals would provide federal oversight to protect against wasteful overproduction and the unfair transfer of wealth from public or tribal hands into corporate coffers. Federal agencies would survey public and Indian lands, judiciously select tracts for development, require competitive bidding to set prices, and ultimately determine which companies received prospecting permits and mining leases. Bidding was necessary to rectify the previous regime’s failure to secure a fair return for federal and Indian resources, but as historian Richard White argues, “revenue was . . . not the main goal of the legislation.” Instead, the true intent of these laws was to ensure the “government could curtail wasteful overproduction by holding back on leases and prospecting permits.”²⁰ Under the new systematic leasing program, federal officials could also ensure that no one company gained monopolistic controls over a particular resource in a specific area.

Or so the theory went. The reality was that the Department of the Interior and its bureaus—the Geological Survey, the Bureau of Land Management, and the Bureau of Indian Affairs—lacked resources to properly determine which lands to open to coal development and to evaluate potential bids. Again, legislators intended these executive agencies to first analyze geological data, assess potential environmental and social costs for mining in a given area, and evaluate the potential market for coal so as to maximize returns and minimize adverse consequences. Instead, after World War II multinational energy firms with ample resources and a desire to diversify their energy holdings performed the legwork to evaluate particular tracts of land and then recommended to Interior which sections should be opened for bidding. As was the case with the Northern Cheyenne, government officials often had no independent information with which to evaluate the appropriateness of a lease offering but typically opened suggested lands to leasing nonetheless, citing either the nation’s interest in developing domestic energy sources or tribal needs for revenue. For their part, tribal governments, which the Indian Mineral Leasing Act had empowered to formally issue the leases, were unprepared to critically evaluate BIA-recommended leases and deferred to their federal trustees. Thus, by retaining federal veto authority and adopting the public mineral leasing template, the legal regime that had intended for tribes to control reservation development had reversed the roles of tribal and federal governments. Federal officials controlled the process, and tribal leaders awaited their recommendations. As with many Progressive plans, implementation failed to match altruistic designs.21

COLLABORATION

This was the regulatory regime facing Northern Cheyenne leaders and federal officials when Max Krueger submitted his December 1965 coal mining proposal. Despite the promises of the Indian New Deal, initial responsibility for evaluating Krueger’s offer fell to the BIA, not the tribal council. Regional staff, cognizant of their trustee duty and pointing to the 1938 Indian Mineral Leasing Act’s implementing regulations, made the determination that a federally run competitive auction was the best way to secure a fair price in this unproven area.

Clearly, BIA officials followed the correct protocol, as the controlling regulations authorized such a bidding process for Indian minerals. The actual 1938 act, however, said nothing of requiring such a procedure for Indian coal. Instead, the act mandated public bidding only for oil and gas rights on Indian lands, which in the 1930s were in greater demand. When the Department of the Interior promulgated regulations to implement the statute, the rules for coal simply followed the process Congress laid out for Indian oil and gas—and all public minerals—noting that reservation resources “shall be advertised for bids.” Perhaps cognizant the statute did not require an auction for minerals other than oil and gas, Interior’s regulations included an exception to competitive bidding for coal if “the Commissioner grants the Indian owners written permission to negotiate for a lease.” In other words, the law did not demand a public auction for Indian coal, and private negotiations between tribes and developers were allowed, but the auction was the default process and the BIA had the authority to determine which process to use. In the case of the Northern Cheyenne, where the extent of reservation minerals was unknown and no mature market existed to provide a benchmark the BIA could use to evaluate a negotiated price, federal officials concluded the competitive lease sale was the safest method for fulfilling their duties.²²

Eager to establish a revenue stream, the Northern Cheyenne offered no resistance to the BIA’s plan for a competitive auction. In February 1966, the tribal council passed a resolution acknowledging that “[Krueger’s] basic proposal as presented has merit” but that it was “in the best interest of the Tribe to Advertise [sic] for Exclusive Coal Prospecting Permits.” Once the tribal resolution reached BIA officials, Acting Area Director Ned Thompson solicited advice from his Washington, D.C., superiors for structuring the auction to attract major coal developers. Thompson explained he would like to “make the offer [to coal companies] as attractive, and with as few obstacles or determents, as possible.” He also noted that time was of the essence as “there is a lot of [coal mining] activity on state lands in these areas, and both [the Northern Cheyenne and Crow] tribes are anxious to get something going.” Again, both local BIA and tribal officials were eager to initiate coal development.23

Fortunately for anxious tribal leaders and regional BIA staff, the agency’s central office shared their optimism that coal mining could alleviate reservation poverty. Washington officials began enthusiastically recommending auction terms to attract major energy developers, including a provision granting the winning bidder a prospecting permit with the exclusive option to lease at pre-fixed royalty rates. This move contravened the process laid out in federal regulations, which envisioned future royalty negotiations when the mining company sought to transform its prospecting permit into a lease. But the BIA wanted to remove the uncertainty of such negotiations from the concerns of prospective mining companies. Thus the agency set this term at 17.5 cents per ton, eliminating the tribe’s primary financial benefit from competitive bidding despite the fact that the inability to set a fair royalty price was the main reason for holding a public auction in the first place. Moreover, this pre-fixed royalty figure was taken directly from royalty rates contained in nearby public coal leases. We will see how, by the early 1970s, the federal leasing system that established this figure was so dysfunctional that the Department of the Interior imposed a moratorium on all federal coal leasing. Nevertheless, in 1966 federal officials were more than happy to borrow from this broken system to establish a fixed royalty rate for Cheyenne coal. With this number set, the only substantial financial term left to bid on was the onetime “bonus” payments paid for each acre of land opened to prospecting. For an agency intent on promoting competition, the BIA was quick to eliminate such competition if it would help attract major developers.24

In addition to promising the winning bidder an exclusive contract to mine Cheyenne coal at low rates, BIA officials suggested other changes to lure major mining firms to the reservation. Deputy Assistant Commissioner Charles Corke waived the regulation limiting coal leases on Indian reservations to 2,560 acres, recognizing that to make mining profitable in this desolate region coal companies would need to construct “mine-mouth facilities” that generated electricity at the reservation mine and then distributed it through regional power grids. Only large firms had the capacity to construct such facilities and the BIA knew this. The agency sought out these types of bidders, hoping that electricity produced on the reservation would spur additional, local industrial activity. To further encourage it, BIA officials provided for a 2.5-cent royalty reduction for coal burned on the reservation.²⁵

Clearly, then, federal officials intended to bring major energy developers to the reservation, but if Northern Cheyenne leaders were wary of such development, their words and actions indicated no such concern. Instead, the opportunity to develop reservation minerals to generate badly needed revenue was a source of pride for many leaders, most specifically tribal president John Woodenlegs. The grandson of famed Cheyenne warrior Wooden Leg, who fought Custer at the Battle of the Little Bighorn, John Woodenlegs consistently touted his administration’s efforts to develop reservation resources for the good of his people. When a February 1966 editorial in the Lincoln (Nebraska) Star lamented the Northern Cheyenne’s state of affairs, for instance, Wooden legs shot back that his reservation was “almost totally underlain by sub-bituminous coal” and that his government was negotiating to develop these lucrative deposits. The tribal president was so outraged by the paper’s inaccurate portrayal of his community as hopelessly destitute that he had Montana’s Senator Lee Metcalf introduce his letter of retort on the Senate floor to correct the historical record. Woodenlegs also met personally with BIA Area Director Canan to make the case for coal development, expressing his frustration that agency personnel were not moving fast enough to publicize his tribe’s coal auction. These complaints spurred BIA official Ned Thompson to again harass his superiors in Washington for immediate authorization for the coal auction, explaining “the Northern Cheyenne Tribe and the Superintendent are very anxious to have the advertisement published as soon as possible.” With federal officials orchestrating the auction, and the Northern Cheyenne providing the impetus, the BIA finally distributed the notice of sale for a Cheyenne coal auction to more than fifty mining companies in late May 1966.26

What happened next was typical of American energy development during the murky days of the 1960s, when energy companies quietly acquired vast amounts of western resources at incredibly discounted prices. Despite the generous terms offered and the widespread dissemination of notice, the Cheyenne’s July 13, 1966, coal auction attracted only one bidder, the Sentry Royalty Company. A known prospecting agent of the world’s largest coal producer, Peabody Coal Company, Sentry “won” the right to prospect almost 100,000 acres of the Northern Cheyenne Reservation for a mere 12-cents-per-acre bonus. The figure represented a whopping 2-cent improvement over the original deal Max Krueger offered a year earlier. Unlike Krueger’s proposal, however, the amended auction terms meant Sentry also secured the exclusive option to mine this area for a fixed royalty of 17.5 cents per ton, or 15 cents if the company decided to burn coal on the reservation. With BIA assistance, the Northern Cheyenne auctioned away rights to millions of dollars of highly desirable low-sulfur coal for less than $12,000 in bonuses and a promise to pay miniscule future royalties.²⁷

How had this happened? And how was it that tribal and federal officials were ecstatic to receive such a low offer to develop Cheyenne coal? The answer to these questions rests mainly with the antiquated legal regime governing Indian minerals. Driven by an ideology of Indian inferiority and built on a broken template designed for extracting public minerals, the law tasked federal, not tribal, officials with developing reservation resources. The government then failed to equip BIA agents with the tools necessary to carry out their mandate. Without the requisite expertise and resources, the legal regime rendered both federal and tribal officials ignorant about the extent of reservation minerals and their value in global energy markets. When interest emerged to mine Cheyenne coal, federal officials pushed to maximize revenue by attracting large-scale developers. They got just one. Without the hoped-for competition, the world’s largest coal company secured Cheyenne minerals on the cheap.