Welcome to The New Interior, a periodic update from Steptoe & Johnson LLP to keep you informed of coming changes at the Department of Interior, and for related matters on Capitol Hill and elsewhere with a new administration taking charge in Washington, DC.  We intend to bring you the very latest on anticipated moves by the Obama Administration and in the 111^th Congress over the next several months, as a new direction takes shape for Interior-related positions and policies.

If you would like to speak with a Steptoe attorney about our Interior practice, please reply to this email or contact Tom Collier (202.429.6242 or tcollier@steptoe.com) or Jody Cummings (202.429.8096 or jcummings@steptoe.com). 

Missed an issue? Click on the links below to access previous newsletters:
    Issue 1
    Issue 2
    Issue 3
    Issue 4
    Issue 5
    Issue 6
    Issue 7

Obama Puts Bush ESA Rule on Hold

Taking another swipe at Bush Administration policy, the White House has released a memo directing the Secretaries of Interior and Commerce to take a fresh look at a December 2008 decision limiting the circumstances in which agencies must consult with the Fish and Wildlife Service (FWS) or National Marine Fisheries (NMFS) prior to undertaking an action that could threaten an endangered species.  Prior to that Bush Administration decision, agencies contemplating an action that could impact endangered or threatened species were required in most circumstances to consult with, and in some circumstances obtain the prior written concurrence of FWS and/or NMFS before a project could proceed.

President Obama has requested that Interior and Commerce review the Bush rule change and determine whether to undertake new rulemaking procedures regarding Endangered Species Act consultative and concurrence processes.  His memo also asks agency heads, for the time being, to exercise their discretion under the Bush rule change to follow the FWS/NMFS consultation and concurrence processes that were in place prior to December 2008.

This announcement signals a return to the Clinton/Babbitt days of lengthy, intense ESA reviews for all projects.

Gray Wolves Removed from Protected Species List

Interior Secretary Ken Salazar has affirmed a Bush Administration FWS decision to remove gray wolves from the list of threatened and endangered species in the western Great Lakes and the northern Rocky Mountain states of Idaho and Montana and parts of Washington, Oregon and Utah. FWS originally announced the decision to de-list the wolf in January.  However, the Obama Administration decided to review the decision as part of an overall regulatory review that was announced shortly after the inauguration. 

FWS cited Idaho and Montana’s approved state wolf management plans as the rationale for de-listing in those states.  In refusing to de-list wolves in Wyoming, FWS has argued that Wyoming’s current state law and wolf management plan are insufficient to conserve its portion of the northern Rocky Mountain wolf population.

Gray wolves were previously listed as endangered in the lower 48 states, except in Minnesota where they were listed as threatened.  Wolves in other parts of the 48 states, including the Southwest wolf population, remain on the endangered list.

More on Interior Priorities: Salazar Meets with the Press

Secretary Salazar held a press conference at the beginning of the week, discussing several items that could receive significant attention at the Department in the coming weeks and months:

• Creation of “renewable energy zones” to spur the development of offshore wind projects in coastal regions, solar energy projects in the Southwest, and onshore wind projects in the Great Plains.  The Secretary offered support for a proposed wind turbine project off Cape Cod (a project heavily criticized by Sen. Ted Kennedy (D-MA)) and noted that parties in mid-Atlantic states like New Jersey and Delaware are interested in quick movement on other wind projects.
    
  
• Taking a closer look at objections to oil and gas leasing in Alaska's Bristol Bay and the Chukchi Sea.  Environmentalists have raised concerns about threats to fisheries and polar bears arising out of those projects.  Proposed leasing off the Virginia coast will also receive review, as Governor Tim Kaine has raised concerns about compliance with state policies.
  
  
• Reviewing the Bush Administration rule that allows loaded firearms in national parks.  The Justice Department is currently battling three groups who sued to enjoin implementation of the Bush Administration decision.  The previous rule allowed individuals to carry an unloaded weapon inside a park as long as it was stowed.  The Obama Administration has yet to announce whether it sides with the Bush Administration on the rule change.  With plans to take a further look at the rule, the Secretary indicated that it will be necessary to look at environmental and public safety aspects of the rule change.
  
  
• Resolving the Cobell litigation, a 12-year-old lawsuit alleging that the federal government has failed to fulfill its trust obligations in accounting for monies collected for Indians from third parties for oil, gas, mineral and grazing leases and timber sales on Indian lands.  Secretary Salazar did not mention a dollar figure offer for resolving the litigation, although amounts in the $7-8 billion range have been part of past discussions during the Bush Administration. 

Carcieri Opinion Creates New Challenge for Indian Country, Buzz About Possible Fix Begins

The U.S. Supreme Court has struck another blow against tribal governments, this time deciding in Carcieri v. Salazar that only tribes “under federal jurisdiction” in 1934 (when the Indian Reorganization Act (IRA) was enacted) can have land taken into trust for them by the Department of the Interior.  Secretary Salazar indicated that he was “troubled” by the decision, and told a group of Indian leaders in Washington last week for the National Congress of American Indians gathering that he would examine all options for finding a way to resolve the concern for tribes that did not establish a formal relationship with the federal government until after the IRA’s enactment. 

The Supreme Court’s ruling does not appear to impact lands already held in trust for tribes recognized after 1934.  It would, however, impact future land acquisitions for those tribes, a number of which are the wealthiest in the nation.

Ramifications of the decision are potentially far-reaching, and several issues are getting considerable attention, including: 

• Will tribes be united on pushing a that will put post-IRA tribes back on equal footing?  Federally-recognized tribes not impacted by the ruling may see an opening to limit economic development and other activities for neighboring, competing tribes who are impacted by the decision.  Recent action from NCAI may have mooted this concern, however, with that organization passing a resolution calling for Congress to amend the IRA so that its benefits are available to all federally-recognized tribes.
   
• How aggressively will state and local governments, and even off-reservation gaming opponents lobby against a fix for post-IRA tribes?  Tribal opponents may see the decision as an opening to crush expanded activities and development for nearby tribes.
    
• Will the decision spawn a host of new lawsuits?  There are appear to be at least two questions that tribes formally recognized after 1934 and their adversaries may seek to clarify in the courts: 1) Even if not a recognized tribe in 1934, was the tribe “under federal jurisdiction,” at the time IRA was enacted?  Post-IRA tribes able to make an “under federal jurisdiction” showing ostensibly escape Carcieri’s impact.  2) Although Carcieri’s holding is limited to the Secretary’s ability to take land into trust for post-IRA tribes, the IRA calls for the adoption of tribal constitutions and creation of tribally-held corporations, among other things.  By calling into question which tribes are not eligible for the IRA’s provisions, Carcieri potentially threatens the validity of tribal business organizations, and in turn may undermine certain kinds of contracts and loans and more.

Few signals have come from Congressional leaders on the issue.  However, both Senate Indian Affairs Committee Chairman Byron Dorgan and House Natural Resources Committee Chairman Nick Rahall have expressed intentions to hold hearings on a potential Congressional fix for the IRA.     

Interior Stimulus Czar Named

Making good on insider reports that began circulating last week, Secretary Salazar has appointed Chris Henderson as a Senior Advisor to the Secretary for Economic Recovery.  As Interior’s “Recovery Czar,” Henderson will oversee more than $3 billion from the American Recovery and Reinvestment Act (“Stimulus”) that Interior is responsible for investing in various projects.  Henderson has served as the chief operating officer for Denver Mayor John Hickenlooper since 2006, following a 15-year career in investment banking and private equity investing.  Most of that time was spent with Vestar Capital Partners.  Henderson, received an undergraduate degree from the University of Colorado at Boulder and a Masters of Business Administration degree from Columbia University.

Although Interior has yet to provide additional word, each of its agencies and bureaus should shortly be announcing which of its personnel are charged with implementing relevant stimulus provisions under Henderson.  

Stimulus Package: Tribes Must Act Quickly as Ball Starts Rolling on Economic Development Bonds at Treasury

A number of bonding provisions in the Stimulus package may provide interesting opportunities for tribal governments looking into financing for new projects.  Among these, the Tribal Economic Development Bonds program could be the most enticing for tribes, as it offers a new type of tax-exempt bonds for tribal governments.  These bonds will allow tribal governments greater flexibility to issue bonds for a wide range of public and private development projects with tax benefits comparable to bonds offered by state and local governments.  

Prior to the passage of the Stimulus, tribal governments could offer tax-exempt bonds only if substantially all of the proceeds from such offerings were used for “essential government functions,” which the IRS has interpreted as excluding commercial projects sponsored by tribal governments.  The Tribal Economic Development Bonds program allows tribes to use tax-exempt bond financing for a much wider variety of projects, including anything that state governments can finance.  In addition to tribally-owned and operated projects, tribal economic development bonds may also be issued as private activity bonds, which are bonds issued by the tribe but whose proceeds benefit a business or private party.  Examples of tribal projects that were previously ineligible for tax exempt financing but that are now eligible include: hotels and convention centers; golf courses; energy facilities; privately-owned manufacturing complexes.  Tribes can also issue, for example, single-family mortgage bonds to finance owner-occupied residences for home buyers.  The Stimulus legislation expressly excludes from eligibility financing for gaming facilities and off-reservation projects.

The Stimulus legislation places a nationwide volume cap of $2 billion on the amount of bonds that tribes may issue under the program – a limit to be shared among all tribal governments.  The legislation also directs the Secretary of the Treasury to determine the allocation of the bonds among the various tribal governments in consultation with the Secretary of the Interior. 

We have learned that on Monday, Christie Jacobs, Director of the IRS Office of Indian Tribal Governments posted on the IRS website a notice to tribes and other interested parties requesting input on tribal bond allocation under the program.  The notice suggests two methods for allocation: 1) a formula that takes into account such factors as tribal size and statistics regarding economic need; and 2) a case-by-case basis whereby applications would be selected based on such factors as economic impact and funding requirements.  The IRS is accepting comments until March 20 and expects to select an allocation method by mid-April.  

Steptoe is working with tribal clients to submit comments on the allocation approaches, and raising concerns to the IRS on behalf of tribes who currently have urgent shovel-ready projects that could be implemented before the proposed date for selection of an allocation method.      

As for Interior input called for by the legislation, insiders tell us that Treasury and Interior are currently in discussions on how the agencies will cooperate to implement the program.  Expect Dr. Bob Middleton, BIA Director of the Office of Indian Energy and Economic Development to be appointed as Interior’s point of contact for issues relating to the Tribal Economic Development Bonds program.

Interior Likely to Appeal Kerr-McGee Decision, Address Royalty Issues in Months Ahead

Secretary Salazar signaled last week that Interior may be ramping up to submit a cert petition to the U.S. Supreme Court challenging a 5th Circuit ruling issued in January which held that Minerals Management Service could not require the payment of royalties from certain production on deepwater oil and gas leases issued between 1996 and 2000 in the Gulf of Mexico.  The leases at issue in the case were obtained by Kerr-McGee Oil and Gas Corp.  However, the holding also impacts dozens of other deepwater leases issued to other companies between 1996 and 2000.

The Secretary indicated that over the next few months, the issue would also be looked at in a larger, comprehensive review of royalty issues – both onshore and offshore – and likely wrapped up in a legislative proposal that the Obama Administration will send to Capitol Hill.  There are plans for Interior to consider MMS and BLM organizational issues as well as those agencies’ management of oil and gas resources and the collection of royalties.  The analysis would also include a comparison of royalty rates on state and private lands versus federal lands.  In discussing such matters since his confirmation, the Secretary has repeatedly cited as justification for this approach an interest in taxpayers receiving a fair market value return.