Proposal follows decades of concerns, lawsuits over federal management of 1.5-million-acre mineral estate the US holds in trust for Osage
(Bloomberg) — The federal government is proposing new rules to protect a sprawling collection of oil and gas rights belonging to the Osage Nation in Oklahoma after decades of criticism that US authorities have mismanaged the estate.
The Department of Interior’s Bureau of Indian Affairs will weigh increasing the amount of money oil and gas producers put up in the form of bonds, a move the agency said would better protect the Osage Nation when companies default. It also proposes updating methods for valuing oil and gas production to prevent price manipulation and “ensure that the Osage Nation receives the full value of its oil and gas,” according to a statement Thursday.
“The federal government has a trust responsibility to administer the Osage Mineral Estate,” said Bryan Newland, assistant secretary for Indian Affairs. “These proposed revisions secure this special trust asset of the Osage Nation for generations to come through accountability and best industry practices.”
The nearly 1.5-million-acre Osage Mineral Estate is held in trust on behalf of the Osage Nation, a federally recognized tribe in northern Oklahoma. In 1906, the mineral estate was divided into 2,229 shares, which later became known as headrights. Each person on a roll of Osage citizens at the time received a share.
The bureau’s proposal comes four months after Bloomberg News aired “In Trust,” a podcast series that raised new questions about the federal government’s handling of the trust relationship with the Osage Nation. As part of that series, Bloomberg in September published a partial list of non-Osage headright holders obtained via a public records request. The list included oil companies, churches, trusts and universities, as well as a nonprofit that closed down nearly three decades ago. In that case, Bloomberg determined the royalty payments had been accumulating in an interest-bearing Individual Indian Money, or IIM, account held by the Interior Department since 2012 while the agency determines the rightful owner or owners. It’s unclear where that money went from 1994 to 2012.
For decades, many Osage headright holders have expressed concern over the Bureau of Indian Affairs’ management of the mineral estate. In 2011, the federal government agreed to pay $380 million to settle the Osage Nation’s allegations that the US had breached its fiduciary duty by failing to get the best possible price for the oil produced from the mineral estate.
Three years later, the Interior Department’s inspector general found fundamental and systemic flaws in how the bureau’s Osage Agency oversaw the mineral estate, flagging shortcomings in its management of data, accounting and the environmental effects of drilling. A separate lawsuit, brought 20 years ago by a group of individual headright holders, seeks a full accounting of the funds managed by the federal government.
Read More: Who Gets Osage Oil Money? A List From BIA Raises New Questions
Everett Waller, chairman of the Osage Minerals Council, said he wants the proposed rules to speed up oil and gas permitting. “These cannot be more cumbersome,” he said by phone Thursday. “The companies can easily go to counties next door and get their permits in days.”
Waller said the permitting slowdown has impacted production, which in turn has caused headright payments to take a hit. “Their checks are going down, but their monthly bills are getting to where they can’t pay them,” he said. “It’s a livelihood that they need.”
It’s an issue Deb Haaland, who was appointed Secretary of the Interior nearly two years ago, has had to weigh alongside her commitment to environmental protection. Haaland, who is the first Native American to serve as a presidential cabinet secretary, was specifically asked about the Osage Mineral Estate in her confirmation hearing, when Oklahoma Senator James Lankford criticized the Bureau of Indian Affairs for a permitting slowdown in Osage County.
Last year, a single headright received $11,980, a steep drop from $40,780 a decade earlier.
Headrights became highly fractionated as shares were passed down to descendants. Roughly a quarter of shares are currently held by non-Osages. The Osage Nation is seeking federal legislation to make it easier for non-Osage headright holders to return their shares to the tribe. A draft of the proposed legislation is currently under review by Oklahoma Congressman Frank Lucas, who has agreed to sponsor the bill.
The Interior Department made its last substantive update to Osage oil and gas leasing regulations in 1974, it said Thursday. The agency will meet with stakeholders about its proposed changes and accept public comments through March 17, it said.
(Updates to add interview with Osage Minerals Council chairman Everett Waller.)
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