Wednesday January 20th 2021
Building Relationships with Tribes and Operating in Reservation Areas: Lessons from FMC v. Shoshone
On January 11, 2021, the United States Supreme Court rejected a petition to review the Ninth Circle's decision in the FMC Corporation v Shoshone-Bannock Tribes case. In that case, the Ninth Circle upheld a Tribal Court ruling requiring FMC Corporation (FMC), a non-Indian company, to pay a tribe-estimated annual license fee of $ 1.5 million for the storage of hazardous waste from the FMC's operations. Phosphorus plant to be paid on the Shoshone -Bannock Tribes (Tribes) Fort Hall Reservation (Reservation). Given that companies are increasingly working with Native American tribes in long-term relationships to develop and operate wind, solar, agricultural, retail and other projects in tribal areas, the Ninth Circle's decision provides a unique and timely opportunity to to see how tribal dishes can work play in the context of non-Indian companies doing business on reservation spaces.
These business efforts can provide significant economic benefits, including federal incentives such as federal finance subsidies and tax credits for the Opportunity Zone, as well as exemptions from state and local sales and property taxes. Investors also look to environmental, social, and corporate governance principles to guide investment decisions and to do business with tribes that promote responsible growth and development for economically disadvantaged tribal communities that adhere to these principles.
These projects also require leases, permits, and other arrangements with tribes, tribal units, and / or tribal members, and may expose non-Indian businesses to tribal laws and courts. The Ninth Circle decision in FMC is an important reminder that, at the start of and during such a relationship, businesses should have a thorough understanding of the legal implications of doing business with tribes and in reserve areas, particularly when that relationship involves land development and land development effects on natural Resources on the reservation of a tribe. It is also important to have agreements that cover tribal jurisdiction and an understanding of the scope of that jurisdiction.
FMC's history with the tribes and activities on reservation
The tribes are a government-recognized Indian entity with sovereign authority over the reservation.1 The reservation is made up of both tribal and non-tribal areas.2 For over 70 years, FMC has had significant operations on the reservation and "has had a profound relationship with the tribes" Including "mining leases, phosphate shale supply contracts, log tax recognition agreements, license fees, and employment and permit agreements." 3 In a previous case, the Ninth Circle described "FMC's presence in the reserve (as) significant, both physical and physical on the money, ”believing that the tribes had authority to require FMC to comply with tribal labor laws
The case at hand concerned FMC's operation of an elementary phosphorus plant in the reserve from 1949 to 2001.5 The plant was located almost entirely in non-Indian toll areas.6 FMC's operations produced approximately 22 million tons of hazardous waste, which is contained in waste storage ponds in the reserve. 7 Other hazardous substances from the operation of FMC remain in the reserve in loose soil and groundwater or are buried in the reserve in around 20 to 30 rail tank cars. 8
In 1990, the Environmental Protection Agency (EPA) designated the facility along with an adjacent off-reservation facility owned by a third party as a superfund site under the Comprehensive Environmental Response, Compensation and Liability Act. 9 In 1997, the EPA sued FMC for violating the Resource Conservation and Recovery Act (RCRA), a federal law that regulates the disposal of solid and hazardous waste. 10
FMC settled the RCRA lawsuit through a consent decree requesting the company to obtain permission from the tribes to store hazardous waste on the reserve.11 FMC and the tribes entered into an agreement under which FMC agreed to 1.5 Millions of USD per year to be paid for a tribal member "Permission to store hazardous waste" on the reservation.12 During the negotiation process, FMC also consented to tribal jurisdiction in oral and written statements.13 FMC stopped paying the permit fee in 2002 after the active plant operation ceased although the waste remains stored in the reserve, and the logs require an annual permit for this storage. 14
Tribes have authority over non-Indians under limited circumstances
The Supreme Court established the basic rules for determining the civil authority of a tribe over non-Indians in Montana versus the United States.15 In this case, the general presumption has been that tribes have no jurisdiction over non-members with two exceptions.16 A tribe can exercise jurisdiction over non-members (1) who "enter into amicable relationships with the tribe or its members through commercial transactions, contracts, leases or other agreements" 17 or (2) whose conduct "threatens or directly affects political integrity"; the economic security or the health or welfare of the tribe. "18 If either of the two exceptions applies, a tribe can exercise civil authority over a non-member, including regulating the non-member's conduct" through taxation, licensing or other means ". 19 It must: Be however a connection between the basis of tribal jurisdiction and the exercise of that jurisdiction by a tribe. 20
Consent may be determined under the first exception “expressly or through the actions of the non-member.” 21 As the Ninth Circuit stated, “The test is not subjective. Rather, it is a matter of whether, given the circumstances, the non-Indian defendant should reasonably have foreseen that his interactions could spark tribal authority. “22
Under the second exception, a tribe must demonstrate that the behavior of the non-member "does more than hurt the tribe." 23 It must "endanger the livelihood or well-being of the tribal community". 24 In the event of pollution, a tribe may “seek to protect its members from harmful uses that threaten the welfare or safety of the tribes, or from the conduct of non-members in the countryside who do the same. "25" Threats to tribal natural resources, including those affecting the tribal cultural and religious interests, pose a threat to tribal self-government, health and welfare. “26
FMC's behavior brought it to tribal jurisdiction
The Ninth Circuit ruled that under both of the Montana exemptions, the Tribes had regulatory and jurisdiction to collect and enforce permit fees for FMC.27
Regarding the first exception, the Ninth Circle noted that “FMC entered into an amicable relationship with the Tribes, both expressly and through its actions, when it negotiated and entered into a licensing agreement with the Tribes for annual use permits and an annual one Requirement of USD 1.5 million is a permit fee for the storage of 22 million tons of hazardous waste in the reserve. "28 FMC" confirmed its consensual relationship with the tribes by signing the Consent Decree requiring FMC to obtain tribal permits "and by judicial approval of the decree in part of that amicable relationship
Regarding the second exception, the Ninth Circuit concluded that the FMC hazardous substances left in the ground and in the air "remain on the reserve indefinitely and continue to pose a threat to the health and welfare of the tribes," in particular if contained, it will fail. 30
Finally, the court found that the behavior regulated by the tribes – the storage of hazardous waste by FMC in the reserve – was directly related to the amicable relationship of the parties.31 In addition, the "annual fee of the tribes of 1.5 million" USD an exceptional bargain "on the fees charged on the free market for the storage of hazardous waste.32 The court concluded that" there is a more than sufficient link between the storage of (hazardous) waste from FMC and the annual Usage permit fee of USD 1.5 million exists to justify the valuation, this fee under Montana's second exception. “33
Lessons learned from FMC's reservation activities
Economic opportunities for American Indian tribes on their reservations, which span more than 50 million acres of a range of resources in the United States, continue to grow. The Ninth Circle's decision that FMC must comply with a tribal permit in these circumstances is a valuable lesson for other parties doing business with tribes and in reservation areas. In the early stages of any relationship with a tribe or tribal unit, it is important to analyze the impact running a business can have on tribal areas and the tribal community. The company should also develop a clear understanding of and demarcate the jurisdiction and authority of the tribes. Negotiating and incorporating provisions in agreements with tribes and tribal associations that address the applicability of tribal laws and courts can prevent unforeseen situations and unwanted surprises. They can also help establish and maintain close working relationships for both non-tribal and tribal units. As the relationship grows and develops, there will likely be other points where tribal jurisdiction will need to be re-regulated and reconciled in new treaties. Consent and compliance with these commitments at every opportunity will serve tribal and non-tribal parties alike.
1FMC Corporation v Shoshone-Bannock Tribes, 942 F.3d 916, 920 (9th Cir. 2019), cert. denied, 2021 WL 78077 (January 11, 2021).
2Id. at 920-21.
3Id. at 933-34 (citations omitted).
4Id. at 934 (citing FMC v Shoshone-Bannock Tribes, 905 F.2d 1311, 1314 (9th Cir. 1990)).
5Id. at 921.
11Id. at 921-22.
12Id. at 921.
13Id. at 921-22.
14Id. at 919, 922
15450, US 544 (1981).
16Id. at 565-66.
17FMC, 942 F.3d at 920 (citing Montana, 450 US at 565).
18Id. (citing Montana, 450, USA, 566). A tribe may also "regulate the conduct of non-members in non-Indian fee land if such regulation is expressly approved by federal law or treaty". I would. at 932.
19Id. 942 F.3d at 932 (citing Montana, 450 USA at 565-66).
20Id. at 933, 940.
21Id. at 932 (citing Water Wheel Camp Recreational Area, Inc. v LaRance, 642 F.3d 802, 818 (9 Cir. 2011) (citing Plains Commerce Bank v Long Family Land and Cattle Co., Inc., 554 US 316, 338 (2008))).
22Id. (citing Water Wheel, 642 F.3d, 817-18 (cited Plains Commerce Bank, 554 USA, 337).
23Id. at 935 (quoting Plains Commerce Bank, 554 USA at 341).
24Id. (cited Montana, 450, USA, 341).
25Id. (cited Plains Commerce Bank, 554 USA, 336).
26Id. (with reference to Plains Commerce Bank, 554, USA, 333).
27Id. at 931, 944.
28Id. at 933.
30Id. at 935-36, 939.
31Id. at 933.
32Id. at 940-41.
33Id. at 941.