Set in early 20th-century Oklahoma on the Osage Indian Reservation, Martin Scorsese’s film “Killers of the Flower Moon” highlights how newly discovered oil became a curse for Osage who held “headrights” to royalties. The U.S. government set up a system of “guardians” for tribal citizens, ostensibly to protect Osage wealth. But the guardians engaged in illicit competition for royalties through deceit, corruption and murder. Many Osage stayed poor. The federal bureaucracy was culpable.
This terrible history foreshadows a sad modern paradox. Far too many American Indians remain impoverished today despite living on reservations rich with natural resources. For them, it’s a bit of the same old story, though thankfully less deadly. And the federal government — still a legal “guardian” — remains culpable, even if now it’s guilty of only death by a thousand cuts.
Today’s Indian reservations have abundant energy resources but have supplied only a pittance of American energy production. Reservations contain almost 30 percent of the nation’s coal reserves west of the Mississippi, 50 percent of potential uranium and 20 percent of known oil and gas reserves. They also contain close to 10 percent of the nation’s wind and solar energy potential and a large stock of critical minerals. Yet Senate committee hearings concluded that only 2 million of 15 million acres of energy resources were developed on reservations, and that $1.5 trillion worth of subsurface reserves remain untapped. Commercial renewable energy production is also lacking, with only a handful of tribes capitalizing on national momentum.
Why do reservation resources often fail to generate reservation wealth? Some tribes choose not to develop their natural resources. Others wish to develop, but stifling federal bureaucracy stands in the way. Ernest Sickey, the influential leader of the Coushatta Tribe, described the byzantine federal regulations as “white tape.”
The white tape stems from an 1831 Supreme Court decision asserting Indians “are in a state of pupilage” and the federal government serves as “guardian” over its tribal “wards.” Thus, the U.S. imposes unparalleled regulatory burdens on tribes. As the Environmental Protection Agency notes, “Activities in Indian country … often require a greater level of NEPA [National Environmental Protection Act] involvement than the same activities in non-tribal areas.” This means 49 regulatory steps were required to get an oil lease in Indian country, compared to just four steps elsewhere. Similar regulatory morass awaits tribes wanting to develop renewable energy.
White tape costs time and money. According to the Government Accountability Office, completing a NEPA environmental impact statement costs an average of $6.6 million and takes 4.6 years to complete. It took the federal bureaucracy eight years to approve paperwork for a pipeline on the Southern Ute Reservation, depriving the tribe of an estimated $95 million in lost revenue.
Adding rolls of tape, the federal government holds land in trust for tribes and individual members based on the notion that it acquired ownership of America through “discovery.” This means neither can lease or sell trust land without federal permission, severely restricting access to capital.
Trust land’s inalienability also produces “fractionated” ownership, wherein hundreds of heirs co-own tiny interests in a single parcel. The Bureau of Indian Affairs notes, “Because decisions on land use generally require majority consent of co-owners, and it can be impossible to obtain the level of consent necessary” to use “highly fractionated land, much Indian land lies idle.”
Trusteeship helps explain why tribal members in the water-thirsty western states do not benefit from paper water rights valued at $1.8 billion annually, and why members of North Dakota’s Three Affiliated Tribes missed out on over $110 million in royalties during the 2010s fracking boom. Bureaucracy and regulatory rules also help explain why good farmland is often left unused despite price booms in agriculture. These valuable resources are effectively “dead capital,” in the phrase of Peruvian economist Hernando De Soto.
The federal government’s track record as “guardian” is dismal. This guardian did not protect Native Americans from the murderous scoundrels depicted in “Killers of the Flower Moon,” and it allowed federal bureaucrats to “lose” billions of dollars belonging to individual Indians through poor recordkeeping and by brokering leases of Indian land for pittances, as established in the Cobell litigation. Nonetheless, federal paternalism persists.
“Killers of the Flower Moon” highlights the U.S. government’s role in a historical injustice. But those concerned with modern poverty should not lose sight of the elephant in today’s room. Oppressive regulatory oversight means paper rights for American Indians, paper rights mean dead capital, and dead capital means poverty. We can’t change the past, but the federal government should cut today’s white tape.
Dominic Parker is an economist at the University of Wisconsin and the Ilene and Morton Harris Visiting Fellow at Stanford’s Hoover Institution. Adam Crepelle is a professor at Loyola University Chicago School of Law.