United States v. Navajo Nation, 537 U.S. 488 (2003)

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certiorari to the united states court of appeals for the federal circuit

No. 01-1375. Argued December 2, 2002—Decided March 4, 2003

The Indian Mineral Leasing Act of 1938 (IMLA) provides that "[u]nallotted lands within any Indian reservation," or otherwise under federal jurisdiction, "may, with the approval of the Secretary [of the Interior (Secretary)] . . . , be leased for mining purposes, by authority of the tribal council or other authorized spokesmen for such Indians." 25 U. S. C. 396a. The IMLA aims to provide Indian tribes with a profitable source of revenue and to foster tribal self-determination by giving Indians a greater say in the use and disposition of the resources on their lands.

In 1964, the Navajo Nation (Tribe) permitted the predecessor of Peabody Coal Company (Peabody) to mine coal on the Tribe's lands pursuant to Lease 8580 (Lease or Lease 8580). The Lease established a maximum royalty rate of 37.5 cents per ton of coal, but made that figure subject to reasonable adjustment by the Secretary on the 20-year anniversary of the Lease and every ten years thereafter. As Lease 8580's 20-year anniversary approached, its 37.5 cents per ton rate yielded for the Tribe about 2 percent of gross proceeds. This return was higher than the ten cents per ton minimum established by then-applicable regulations implementing the IMLA. It was substantially lower, however, than the rate Congress established in 1977 as the minimum permissible royalty for coal mined on federal lands under the Mineral Leasing Act. In June 1984, the Area Director of the Bureau of Indian Affairs, acting pursuant to authority delegated by the Secretary and at the Tribe's request, sent Peabody an opinion letter raising the Lease 8580 rate to 20 percent of gross proceeds. While Peabody's administrative appeal was pending before Deputy Assistant Secretary for Indian Affairs John Fritz, Peabody wrote to Secretary Hodel, asking him either to postpone decision on the appeal or to rule in Peabody's favor. Peabody representatives also met privately with Hodel during that period. In July 1985, Hodel sent a memorandum to Fritz "suggest[ing]" that he inform the parties that his decision was not imminent and urging them to continue their efforts to resolve the matter in a mutually agreeable fashion. The Tribe resumed negotiations with Peabody. In November 1985, the parties agreed to amend the Lease to provide, among other things, for a royalty rate of 121/2 percent of monthly gross proceeds, which was the

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