Oklahoma Oil and Gas Business Braces for Change in Wake of Supreme Court Decision

On July 9, 2020, the Supreme Court issued its opinion in McGirt v. Oklahoma,[1] ruling that most of the eastern half of Oklahoma is an Indian reservation.[2] While the decision ostensibly resolves a jurisdictional challenge to a criminal conviction, the labeling of over 19 million acres in Oklahoma (including most of the city of Tulsa) as reservation could significantly impact area businesses, including oil and gas development. Chief Justice Roberts’ dissent forecasts as much, stating, “The decision today creates significant uncertainty for the State’s continuing authority over any area that touches Indian affairs, ranging from zoning and taxation to family and environmental law.”[3]

As described below, the extent to which McGirt will impact oil and gas business in Oklahoma will hinge on a new regime of overlapping federal, state, and tribal regulation, accompanied by what will likely be years of litigation to determine the practical effects of this new regime.

The issue in McGirt centers on whether petitioner, who was convicted by an Oklahoma state court of three serious sexual offenses, should have been tried in federal court under the Major Crimes Act as offenses committed by an Indian within the limits of an Indian reservation.[4] Although Oklahoma has exercised criminal jurisdiction in the disputed area for well over a century, the Supreme Court reiterated that this is irrelevant. The general propositions remain that states do not have jurisdiction over crimes committed by Indians on Indian land and that there must be clear evidence of disestablishment for land to cease being considered “Indian Country” under 18 U.S.C. § 1151. Because McGirt is a member of the Seminole nation and his crimes took place within the Muscogee (Creek) Nation’s original reservation boundaries (a reservation that was never legally disestablished), the court held that Oklahoma lacked jurisdiction to prosecute McGirt and reversed his convictions.[5]

In reaching this decision, the court analyzed a series of 19th-century treaties and concluded that the eastern half of Oklahoma never ceased to be land reserved as “Indian Country”—land that was granted by the United States to the Creek Nation in fee simple for “so long as they shall exist a nation, and continue to occupy the country hereby assigned to them.”[6] In the absence of any congressional intent to the contrary, the agreement must stand and the referenced land cannot be included within or annexed to any state.[7] Oklahoma’s historical exercise of authority and jurisdiction was of no moment because there was a continued tribal interest in the reserved lands and “States have no authority to reduce federal reservations lying within their borders.”[8]

The Supreme Court recognized that the reservation land described in the treaties, once undivided and held by the Tribe, is now fractured into pieces: “While these pieces where initially distributed to Tribe members, many were sold and now belong to persons unaffiliated with the Nation.”[9] But, as the court explained, federal law expressly contemplates private land ownership within reservation boundaries: “Congress does not disestablish a reservation simply by allowing the transfer of individual plots, whether to Native Americans or others.”[10] Importantly, although the Major Crimes Act is a criminal statute, whether a particular territory is designated as “Indian Country” under the Act will “generally appl[y] as well to questions of civil jurisdiction.”[11]

In the dissent, Chief Justice Roberts offers several potential consequences that could result from the majority’s decision (ranging far beyond matters of criminal jurisdiction). These include the ominous statement that the ruling “may destabilize the governance of vast swathes of Oklahoma.”[12] The reasoning is that many laws spring into effect when land is declared a reservation and reservation status “confer[s] on tribal government power over numerous areas of life—including powers over non-Indian citizens and business.”

Under Supreme Court precedent, “tribes may regulate non-Indian conduct on reservation land, so long as the conduct stems from a ‘consensual relationship[ ] with the tribe or its members’ or directly affects the ‘political integrity, the economic security, or the health or welfare of the tribe.’”[13] The latter is particularly relevant here. Because the eastern half of Oklahoma must be treated as reservation under McGirt, tribes will have the power to regulate commercial conduct in this area where the conduct impacts the health or welfare of the tribe. Oil and gas business in Oklahoma must consider the impact this may have in the months and years to come.

While specific impacts on the state’s oil and gas industry are likely to be dictated by post-McGirt negotiations between federal and state authorities and the Native American tribes, the potential effects can generally be divided into two major categories...