Merrion v. Jicarilla Apache Tribe

1982-01-25

Headline: Tribal severance tax on oil and gas production upheld, allowing the Jicarilla Apache Tribe to tax non‑Indian lessees on reservation production and collect revenue while federal law has not removed that power.

Holding: The Court affirmed that the tribal council had authority to impose a severance tax on oil and gas produced on its reservation from non‑Indian lessees, and the tax did not violate the Commerce Clause.

Real World Impact:

Allows tribes to tax non‑Indian oil and gas lessees on reservation production.
Gives tribes new local revenue to fund police and government services.
Subjects oil companies to an additional tribal tax even when states also tax.

Topics: tribal taxation, oil and gas production, reservation law, interstate commerce

Summary

Background

The dispute is between 21 non‑Indian oil and gas lessees and the Jicarilla Apache Tribe, which owns a large reservation in northwestern New Mexico set aside in 1887. Beginning in the 1950s the companies obtained long‑term mineral leases approved by the Secretary of the Interior. In 1968 the Tribe revised its constitution and in 1976 the Tribal Council, with the Secretary’s approval, enacted an ordinance imposing a severance tax on oil and gas produced and removed from tribal lands. The District Court enjoined enforcement; the Tenth Circuit reversed; the Supreme Court granted review and affirmed the appellate court’s decision.

Reasoning

The Court framed the central question as whether the Tribe has authority to tax nonmembers who do business on the reservation and whether that tax violates the Constitution’s limits on interstate commerce. The majority held the power to tax is an inherent attribute of tribal sovereignty used to fund government services and does not derive only from the tribe’s power to exclude outsiders. Even if the taxing power were tied to exclusion, the Court found no clear waiver in the leases and stressed that Congress has not divested tribes of this authority. Because the Tribe and its tax ordinance received the required approvals from the Secretary of the Interior, and because Congress has provided administrative checkpoints, the tax also passed the Court’s commerce‑clause analysis: the taxable event is severance, the tax has a substantial territorial nexus, and it is not discriminatory in form.

Real world impact

Oil and gas companies operating under long leases on the reservation must pay the tribal severance tax at the wellhead. The ruling lets the Tribe raise local revenue to fund police and services and confirms federal oversight through required approvals. The decision also leaves room for separate challenges to state taxes, but it permits concurrent tribal taxation so long as Congress has not acted differently.

Dissents or concurrances

Justice Stevens, joined by the Chief Justice and Justice Rehnquist, dissented, arguing the Tribe’s taxing power over nonmembers rests on the power to exclude and that the leases granted the companies vested rights that a later tax unfairly and retroactively burdens.