Building Relationships with Tribes and Operating on Reservation Lands: Lessons From FMC v. Shoshone

On 11 January 2021, the United States Supreme Court declined a petition to review the Ninth Circuit’s decision in FMC Corporation v. Shoshone-Bannock Tribes. In that case, the Ninth Circuit upheld a tribal court decision requiring FMC Corporation (FMC), a non-Indian business, to pay a tribally-assessed annual permit fee of US$1.5 million to store hazardous wastes from FMC’s phosphorous plant operations on the Shoshone-Bannock Tribes (Tribes) Fort Hall Reservation (Reservation). Given that companies are increasingly engaging with Native American tribes on long-term relationships to develop and operate wind, solar, agriculture, retail, and other projects on tribal lands, the Ninth Circuit’s decision provides a unique and timely opportunity to see how tribal jurisdiction can play out in the context of non-Indian companies conducting business on reservation lands.

These business endeavors can offer distinct economic advantages, including federal incentives such as federal financing subsidies and Opportunity Zone tax credits, as well as exemptions from state and local sales and property taxes. Investors are also looking to environmental, social, and corporate governance principles to guide investment decisions, and business collaborations with tribes that promote responsible growth and development for economically distressed tribal communities comport with these principles.

These projects also require leases, permits, and other agreements with tribes, tribal entities, and/or tribal members and may subject non-Indian businesses to tribal laws and courts. The Ninth Circuit’s decision in FMC is an important reminder that, at the outset, and during any such relationship, companies should have a comprehensive understanding of the legal ramifications of doing business with tribes and on reservation lands, particularly when that relationship involves land development and impacts to natural resources on a tribe’s reservation. It is also critical to have agreements that cover tribal jurisdiction and an understanding about the extent of that jurisdiction.

The Tribes are a federally recognized Indian entity with sovereign authority over the Reservation.¹ The Reservation consists of both tribal and non-tribal lands.² For over 70 years, FMC has had considerable operations on the Reservation and “an extensive relationship with the Tribes,” including “mining leases, contracts for the supply of phosphate shale, agreements recognizing the Tribes’ taxing power, royalty payments, and employment and permit agreements.”³ In a prior case, the Ninth Circuit described “FMC’s presence on the reservation [as] substantial, both physically and in terms of the money involved,” and held that the Tribes had authority to require FMC to comply with the Tribes’ on-reservation tribal employment laws.⁴

At issue in the present case was FMC’s operation of an elemental phosphorous plant on the Reservation from 1949–2001.⁵ The plant was almost entirely located on non-Indian fee lands.⁶ FMC’s operations produced approximately 22 million tons of hazardous waste that are contained in waste storage ponds on the Reservation.⁷ Other hazardous materials from FMC’s operations remain on the Reservation in loose soil and groundwater or are buried on the Reservation in some 20–30 railroad tanker cars.⁸

In 1990, the Environmental Protection Agency (EPA) designated the plant, along with an adjoining off-reservation facility owned by a third-party, as a Superfund Site under the Comprehensive Environmental Response, Compensation, and Liability Act.⁹ In 1997, EPA sued FMC for violations of the Resource Conservation and Recovery Act (RCRA), a federal statute that regulates the disposal of solid and hazardous wastes.¹⁰

FMC settled the RCRA suit via a consent decree that required the company to obtain permits from the Tribes to store hazardous wastes on the Reservation.¹¹ FMC and the Tribes entered into “an agreement under which FMC agreed to pay $1.5 million per year for a tribal use permit allowing storage of hazardous waste” on the Reservation.¹² During the negotiation process, FMC also consented to tribal jurisdiction in verbal and written statements.¹³ FMC stopped paying the permit fee in 2002 after it ended active plant operations, even though the waste remains stored on the Reservation, and the Tribes require an annual permit for that storage.¹⁴

The Supreme Court established the ground rules for determining a tribe’s civil authority over non-Indians in Montana v. United States.¹⁵ That case established a general presumption that tribes do not have jurisdiction over nonmembers, subject to two exceptions.¹⁶ A tribe may exercise jurisdiction over nonmembers (1) who enter “consensual relationships with the tribe or its members, through commercial dealings, contracts, leases, or other arrangements,”¹⁷ or (2) whose...