February 27, 2006

US Indian Tribes Eye Rocky Mountain Energy Plans

By Laura Zuckerman

MISSOULA, Montana (Reuters) - Resource-rich but job- poor American Indian tribes in the Rocky Mountain region are targeting energy development as a remedy for their economic ills.

"We want to become the developer and the manager of our own resources," said Dan Belcourt, a lawyer for the Chippewa Cree Tribe in northern Montana.

The push to develop Indian lands is tied to higher energy prices and provisions in the 2005 federal Energy Act for grants, low-interest loans and other incentives to develop tribal oil and natural gas resources.

Only 43 of the nation's 279 Indian reservations boast oil and gas reserves and the vast majority of those are in remote, rugged regions in the West where casino gaming and other economic developments are not feasible.

While the 56 million acres that make up Indian lands constitute 5 percent of the total U.S. land area, they hold about 10 percent of the nation's energy resources.

With the federal government forecasting a record 11,000 applications for oil and gas onshore drilling in 2007, with a heavy concentration in the Rocky Mountain region, Indian property is "a kind of last stronghold" yet to be tapped, said Rick Stefanic, an environmental specialist with the U.S. Bureau of Indian Affairs in Billings, Montana.

We're seeing a spike in activity on our reservations," said Stefanic, whose office oversees tribes in Montana and Wyoming.

The Navajo Nation, for example, seeks to partner with Sithe Global Power LLC, 80 percent owned by Blackstone SGP Capital Partners, to generate coal-fired electricity in New Mexico.

Montana's Gros Ventre and Assiniboine tribes plan to offer oil and gas leases for the first time in decades and to seek higher royalty rates for development.


The Gros Ventre, Assiniboine and other Western tribes have reason to push for more profits: the unemployment rate on some reservations runs as high as 70 percent. But tribal leaders say there is no way to measure the damage that comes from chronic poverty and joblessness.

In 2005, more tribes brokered deals with energy companies to explore for oil and gas reserves, including the Crow Tribe in Montana and the Northern Arapaho and Eastern Shoshone tribes on the Wind River Indian Reservation in Wyoming.

The Crow Tribe is working with Westmoreland Coal Co. on possible energy projects in Montana.

Montana's Chippewa Cree Tribe, on the state's smallest reservation, has big energy plans. It aims to set up a company to acquire a controlling interest in gas exploration and production and to build a $90 million ethanol fuel plant, but does not have a partner yet.

Chippewa Cree Chairman John Houle said tribes want to reap more profits from joint energy deals "and not leave them on the table anymore."

With the formation of Chippewa Cree Tribal Energy, the tribe hopes to duplicate the success of Red Willow Production Co., an energy developer wholly owned by the Southern Ute Tribe in Colorado.

The success of joint ventures, however, has been spotty, said Don DeCarlo, a manager at Devon Energy Corp..

"There's no doubt the industry will have to play a strong role to get the lands developed," DeCarlo said. "Historically, tribes haven't had a lot of capital to invest."

The prospect of large-scale development of oil, gas and coal is a source of tension on Indian lands, with some tribes balking at exploiting natural resources because of cultural and environmental issues.

"A lot of tribes are split over whether they want to risk their lands," said Tom Power, chairman of the economics department at the University of Montana. "But you'll always have someone saying: 'What the hell, it's the only thing we have going for us.' That debate has never quieted."