On November 19, 2015, the U.S. Department of the Interior published a final rule, Rights-of-Way on Indian Land (Final Rule), comprehensively revising current regulations governing rights-of-way (ROWs) on Indian land, which were promulgated over 45 years ago and last updated 35 years ago. The Final Rule was scheduled to go into effect on December 21, 2015, but the Department recently announced a 90-day extension of the effective date to March 21, 2016.
The Final Rule will make significant changes to the current regulations and includes new provisions addressing issues that are not covered by current regulations, such as tribal jurisdiction and taxation of improvements within ROWs, tribal authority to investigate compliance with the ROW grant, and the authority of landowners (tribal and individual) and grantees to negotiate terms for remedies for ROW violations to be incorporated into the ROW grant. Some, but not all, provisions of the Final Rule may apply to ROWs granted before the effective date.
There are over 56 million acres of Indian land held in federal trust or restricted status in the United States. Through a series of enactments beginning in 1899, Congress has authorized the Secretary of the Interior to grant ROWs over Indian land for a wide range of purposes. Until the middle of the Twentieth Century, the Bureau of Indian Affairs (BIA) controlled the process of granting ROWs, with little input from, or without the consent of, Indian landowners. But with changes in federal law and policy and other factors, tribal and individual Indian landowners have become more actively engaged in the negotiations for ROWs on their land. The Final Rule will likely advance this trend significantly.
Overview of Significant Provisions of the Final Rule
The Final Rule is lengthy and complex. The following discussion highlights several of its key provisions.
What Does the Final Rule Apply to, and Who Is Affected?
The Rule applies only to ROWs on "Indian land" and "BIA land" (the latter term being of less consequence under most circumstances). "Indian land" means the surface estate of any tract of land which is owned in trust or restricted fee status by a federally recognized Indian tribe, a tribal corporation chartered under the Indian Reorganization Act of 1934, or one or more individual Indians.
Generally, the Final Rule treats tribal and individual Indian land in the same or a similar manner. But there are important differences in some requirements for ROWs on tribal land versus individual Indian land, adding complexity to the processes for acquiring, renewing, amending, assigning, or mortgaging a ROW that crosses both tribal and individual Indian land.
Current or future ROW grantees potentially affected by the Final Rule may include federal, state and local government agencies; utility companies; oil and gas producers and pipeline companies; telecommunication companies; electrical power transmission and distribution companies; railroad companies; and many others.
Does the Final Rule Apply to Preexisting ROWs?
Certain provisions of the Final Rule may affect both preexisting (i.e., pre-effective date) ROWs and new ROWs (i.e., granted on or after the effective date) on Indian land; nearly all apply to ROWs granted in the future (with a special rule for ROWs whose applications were pending but not approved as of the effective date, giving the applicant a choice). The Final Rule states that its "procedural" requirements will apply to preexisting ROWs to the extent those requirements do not conflict with the "explicit provisions" of the original ROW grant or the federal law authorizing the grant, and that "non-procedural" requirements will not apply to preexisting ROWs.
The Preamble gives some illustrations of procedural versus non-procedural requirements. For example, the Preamble states that the Final Rule's requirements for obtaining an amendment, assignment, mortgage, or renewal of a ROW are "procedural" and will apply to future requests to amend, assign, etc. a pre-effective date ROW unless those requirements conflict with the provisions of the ROW grant or applicable federal law, whereas "[a]n example of a non-procedural provision is a regulatory statement of what jurisdiction applies."
What Are the Requirements for ROW Assignments Made Before the Effective Date?
Whether it is "procedural" or not, one provision of the Final Rule by its terms expressly applies to preexisting ROWs. The Preamble points out that past assignments of ROWs on Indian land were often made without notice to the BIA or the tribe. Because of that the BIA has no record of a very large number of Indian land ROW assignments. The Final Rule requires assignees under pre-effective date assignments to document their assignments with the BIA no later than 120 days after the March 21, 2016, effective date (i.e., July 17, 2016), or to notify the BIA that they need additional time, with an explanation of the reason an extension is needed.
This requirement to document pre-effective date assignments appears to include "assignments" of ROWs that occurred by way of corporate merger or acquisition or by operation of law. While the Final Rule exempts these kinds of "assignments" made after the effective date from the landowner consent and BIA approval requirements of the Final Rule, this exemption does not purport to relieve holders of any form of pre-effective date ROW assignments from the 120-day documentation requirement.
The 120-day documentation requirement for pre-effective date assignments should not be taken lightly. Although the Final Rule has yet to be interpreted or applied, it is possible that failure to comply with any requirement of the Final Rule has the potential of putting a ROW out of compliance with the Final Rule and possibly the terms of the ROW grant itself. Such noncompliance might cause problems when the assignee later seeks to renew, amend, reassign, or mortgage a ROW and may also provide the BIA with grounds to initiate enforcement procedures.
Does the Final Rule Address New Uses of Existing ROWs?
The Final Rule states that a new use of an existing ROW that is not specified in the original grant and not within the "scope of the use specified in the original grant of the existing right-of-way" will require either an application to amend the ROW or an application for a new ROW to cover the new use (depending on whether the new use will require "ground disturbance").
The Final Rule states that "[a]n unauthorized use within an existing right-of-way is also a trespass" and that a trespass or unauthorized change in use "may result in enforcement actions, including, but not limited to, cancellation of the grant." Accordingly, a careful analysis of the terms of a ROW grant and the Final Rule itself would be prudent before initiating or allowing any new use.
Does the Final Rule Address Applicable Law, Jurisdiction, and Taxation?
The Final Rule includes provisions addressing applicable law, jurisdiction, and taxation that have no counterpart in earlier regulations governing ROWs on Indian land. The Final Rule states that:
- ROWs granted under the Final Rule are subject to applicable federal law and tribal law (except to the extent that tribal law is inconsistent with federal law) but "are generally not subject to State law or the law of a political subdivision thereof."
- The Secretary's grant of a ROW "will clarify that it does not diminish to any extent" an Indian tribe's jurisdiction, taxing power, authority to enforce tribal law, or sovereign power to exercise civil jurisdiction over non-members on Indian land.
- ROWs granted under the Final Rule, including improvements and activities within the ROW and the ROW interest itself, "are not subject to any fee, tax, assessment, or other charge" by state or political subdivision thereof, but are subject to taxation by the Indian tribe.
The Preamble goes further on the issue of taxation by asserting that federal law preempts any effort by a state or local government to tax these ROW elements.
While these provisions appear to be worded so as to apply prospectively only, they do not expressly say so. As noted above, the Preamble suggests that the provisions relating to jurisdiction are "non-procedural" and therefore should not apply to preexisting ROW grants. However, the Preamble also states that while the "question of whether tribal law or taxes apply to preexisting right-of-way grants after the effective date of the new regulations is not before the Department at this point,… to the extent any preexisting right-of-way is assigned or amended, the provisions of the new regulations govern."
New Bonding and/or Insurance Requirements and Landowner Consent Requirements
The Final Rule includes bonding and insurance requirements that go beyond similar provisions in the current regulations—e.g., future rentals; damages and remediation costs incurred due to releases of contaminants, explosives, hazardous material, or wastes within the ROW; certain operating and maintenance charges relating to irrigation projects; and restoration of the premises to their condition as existed at the start of the ROW or as provided in the ROW grant.
Many provisions of the Rule address the issue of landowner consent—for the original grant of a ROW and for renewals, amendments, assignments, and mortgages of a ROW. Although the current regulations also contain some landowner consent requirements, the Final Rule contains new requirements for assignments and mortgages, as well as new requirements applicable to tracts of land subject to life estates.
Compensation for and Duration of a ROW
The Final Rule has several sections addressing a range of landowner compensation issues. The Final Rule gives Indian tribes broad authority to negotiate the monetary compensation that is due. The Final Rule provides for more BIA oversight in determining compensation for ROWs on individual Indian land and will require not less than fair market value, except under certain specified circumstances.
The Final Rule also treats tribal and individual Indian land differently with respect to duration of the ROW. While under the Final Rule the BIA will defer to an Indian tribe's determination of what is reasonable for the duration of a ROW on tribal land, the agency will provide more oversight in determining the duration of ROWs on individually owned land and will "generally" consider a maximum of 20 years for the initial terms of ROWs for "oil and gas purposes" and a maximum of 50 years, inclusive of the initial term and any renewal terms, for all other purposes.
The foregoing is only a summary of a limited selection of the Final Rule's numerous new requirements for ROWs on Indian land. A full understanding of how the Final Rule may affect present and future Indian land ROW grantees requires a careful analysis of both the Final Rule and its Preamble—including the public comments and the Department's responses—as well as the terms of the specific ROW grant and the statutory or other legal authority for the grant. Questions about the Final Rule or a particular existing or planned ROW over Indian land should be directed to David A. Mullon Jr. at 202.344.4519 or damullon@Venable.com; Kathryn Floyd at 202.344.4696 or kkfloyd@Venable.com; or Jay Johnson at 202.344.4698 or jcjohnson@Venable.com.