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Mineral Leases and Royalties
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1103398
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Mineral Leases and Royalties
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Bradley H. Patterson Files (Ford Administration)
Bradley Patterson's Native American Programs Files
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Indians of North America
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1975-08-01
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The original documents are located in Box 4, folder "Mineral Leases and Royalties" of the
Bradley H. Patterson Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Re: Indian affairs 8/1
OIH
TM
AMERICANS for INDIAN OPPORTUNITY
1816 JEFFERSON PLACE. N.W., WASHINGTON D.C. 20036
(202) 466-8420
LaDonna Harris
August 5, 1975
President
BOARD OF DIRECTORS
I. W. Abel
Lionel Bordeaux. Signs
Edgar Bowen. Com-Oregon
Terry Brown. Karek
Lee Back
The
no
Price M. Cobbs. M.D.S.
Eugene Crawford. Stearity
Ada Deer. Menominez
Jack Edma. Sheehene
The Honorable Gerald Ford
Blackfeet
The White House
Coy G. Eklund
Roy George.
Washington, D.C. 20500
LaDonna Harris: Commerche
The Honorable Williams L Hensley,
Esidmo
Dear President Ford:
Rev. Theodore M.
Hasburgh.
C.S.C.
Minerva Jenkins Apachers
I am absolutely outraged by the reports in the
Forrest Kassanavoid,
Commacher
Yvonne Knight. Pones
enclosed article from the New York Times indicating
Louis LaRose. Winnebego
that the Interior Departments Audit and Investigation
David Lester. Creek
Office has concluded that Indian tribes are not
Demis Limberhand. Northern
Cheyenne
receiving "all royalty payments due them" for
Philip Martin.
leases on their reservations.
Grace McCullah Namehas
N. Scott Momaday. Klower
Jerry Muskrat. Cherelore
We shall appreciate receiving an immediate
Joe Dan Osceola. Sominate
Morgen Otts.
report of the tribes and the amounts of money
Apache-Arapaho-Kieesc
Maria Tallchief Pascher, Ourge
they have been denied and your plans for restitution
Elma Patterson: Tuscarere
including interest on the money due and not paid
Jack Rushing. Creek
to them.
Joe S. Sando. Jemes
Vickie Santana. Southern
Piegan-Blockfeet
W.J. Strickland. Lumbee
Our studies of the leases made by the Federal
James A. White. Menomines
Government for Indian resources reveal that they are
among the poorest in the world to begin with. To
find that even their meager terms are not being
met is simply outrageous.
We shall appreciate hearing from you at your
earliest convenience.
Sincerely,
LaDonna Harris-
President
CC: Senator Jackson
Senator Abourezk
GERALD 8 FORD LIBRA
Digitized from Box 4 of the Bradley H. Patterson Files at the Gerald R. Ford Presidential Library
9
AIO
AMERICANS for INDIAN OPPORTUNITY
1816 JEFFERSON PLACE. N.W.. WASHINGTON D.C. 20036
(202) 466-8420
August 13, 1975
LaDonna Harris
President
ence-
BOARD OF DIRECTORS
I. W. Abel
Lionel Bordeaux, Sioux
Edgar Bowen, Coos-Oregon
Terry Brown, Karok
Lee Buck
The Honorable Gerald R. Ford
Price M. Cobbs, M.D.
The White House
Eugene Crawford, Sioux
Ada Deer, Menominee
Washington, D.C. 20500
Jack Edmo. Shoshone-Bannock.
Blackfeet
Coy G. Eklund
Dear President Ford:
Roy George. Nooksack
LaDonna Harris, Comanche
The Honorable William L. Hensley,
Eskimo
Due to my negligence, I did not put in the enclosure
Rev. Theodore M. Hesburgh,
C.S.C.
with our President's letter to you on August 5, 1975,
Minerva Jenkins, Apache
Forrest Kassanavoid, Comanche
which was an article from the New York times concerning
Yvonne Knight. Ponca
royalty payments to Native Americans on their leases.
Louis LaRose. Winnebago
David Lester, Creek
Dennis Limberhand, Northern
Cheyenne
Please accept my deepest apologies.
Philip Martin. Choctaw
Grace McCullah, Navaho
N. Scott Momaday. Kiowa
Sincerely yours,
Jerry Muskrat. Cherokee
Joe Dan Osceola. Seminole
Morgan Otis.
Apache-Arapaho-Kiowa
Maria Tallchief Paschen, Osage
Elma Patterson, Tuscarora
Charlene Kepher
Jack Rushing, Creek
Joe S. Sando. Jemez
Charlene Nephew
Vickie Santana, Southern
Piegan-Blackfeet
Secretary to LaDonna Harris
W. J. Strickland, Lumbee
James A. White. Menominee
President
Enclosure
GERALD FORD
THE
NEW
YORK
TIMES,
SUNDAY,
JULY
27,
1975
U.S. Failing to Get Its
Due in Oil Royalties
Problem Is
For example, it found that
Rather the failure of the
undervaluation of gas pro-
Government to get all the
duction in just one year by
royalty income it could and
the Northern Rocky Moun-
should receive was set down
Pinpointed
tain area offices cost the
to an inexport accounting
Government $136,000 in roy-
system and imprecise report-
As Official
alties, and that "the real
ing procedures that often led
loss is probably several times
to company errors and delays
that figure."
in payments.
Ineptitude
Again it discovered that
There was an oblique sug-
a postaudit by just one of
gestion that the Geological
the Geological Survey's six
Survey, an agency made up
area offices that covered
largely of scientists and en-
By E. W. KENWORTHY
only 10 per cent of the ac-
gineers, was more interested
counts under its supervision
in oil exploration and devel-
produced $362,000 in added
opment than in collecting
WASHINGTON-The Unit-
royalties.
royalties, and that therefore
ed States Government is not
The highly critical report
the survey should be relieved
getting full value from on-
comes at a time when the
of the latter responsibility.
shore gas and oil leases on
Geological Survey has been
In commenting on the un-
Federal lands, according to
under fire on other fronts.
derstaffing of the Royalty
a review of the royalty ac-
Its expertise has been called
Accounting System, which
counting system by the Inte-
in question by oil company
has only 54 employes, and
rior Department's Office of
geologists who have regarded
its lack of expertise, the
Audit and Investigation.
the survey's estimates of the
report said that interview
Nor, the study concludes,
nation's undiscovered, re-
suggested this was due to "a
are Indian tribes receiving
coverable oil as highly opti-
negative attitude on the part
"all royalty payments due
mistic and unrealistic.
of management."
them" for leases granted on
In the early 1960's the
A scientific organization,
their reservations-a finding
survey's estimate ranged
the report said, had a tenden-
that the Office of Audits
from 400 billion to 590 billion
cy is "underestimate the me-
says raises questions about
bar.els. Last year, however,
portance of other disciplines
the Interior Department's
Vincent E. McKelvey, the
or to relogate other disci-
proper discharge of its "trust
survey's director, estimated
plines to minor roles."
responsibility."
it to be 200 billion to 400
If this was putting it mild-
These conclusions were
billion barrels. And a few
ly, the report also put it
reached after an investiga->
weeks ago, the estimate was
bluntly when it said: "The
dropped to 50 billion to 127
Conservation Division [of the
tion lasting from March to
December last year of royal-
billion barrels-roughly the
survey] has never come to
ty collections, which, under
estimate of oil company and
grips with the issues of es-
the 1920 Mineral Leasing
independent geologists.
tablishing fair product value
Act, are the responsibility
In another area, the Gener-
and verifying production vol-
of the Interior Department's
al Accounting Office dis-
ume." Royalty payments are
closed that several high level
based on volume of output.
United States Geological
Nevertheless, the report
Survey.
survey officials were stock-
credited the Conservation
The report found that the
holders in companies affect-
vision with recognizing the
losses sustained by the Fed-
ed by actions of the survey.
shortcomings in royally of-
eral Government, the states
There have been com-
Tection and requesting the
with which Federal income
plaints 0.1 Capitol Hill and
study.
is sháred, and Indian tribes
from consumer and environ-
Furthermore, in a lengthy
were attributable to the Geo-
mental organizations for a
comment on the audit report,
logical Survey's undervalua-
long time that the upper
the Conservation Division en-
tion of oil and gas pro-
echelons of the Geologic Sur-
dorsed many of the recom-
duction, inadequate and
vey were too heavily staffed
FORD
mendations made. For CX-
confusing reporting proce-
with scientists and engineers
ample, the division. under
dures on production and
who had come from the oil
direction of Russell Wayland,
sales by oil companies, de-
and gas industries or who
said: "We agree that there
layed royalty payments, poor-
intended to go into such em-
is a need to expand the pres-
accounting procedures, fail-
ployment after Government
ent accounting staff and
ure to conduct reviews of
service.
that
more professional
company reports and staff
However, there was not
accountants should be
deficiencies in both "exper-
the slightest suggestion in
hired."
tise and numbers."
the audit report of any collu-
The survey now adminis-
The report said that it was
sion between officers in the
ters 12,386 leases on Federal
impossible to put a figure
survey's Royalty Accounting
and Indian lands, involving
on the total losses, but there
System and oil and gas pro-
31,399 producing oil and gas
was reason to believe them
ducers. Nor was any
wells.
"significant," probably on
evidence adduced of deliber-
Under the law and regula-
the order of several million
ate cheating of the Govern-
tions, lessees winning com-
dollars a year.
ment by the companies.
petitive bids pay from 12½
to 25 per cent royalty on
and 10 per cent to the Feder-
"strictly through the gener-
Among the
oil and either 12½ or 16
al Treasury.
osity of the purchaser. Area
tions of the audit team
2/3 per cent on gas produced
Among the practices un-
offices receive such state-
standardized and timply
from the leases. The royalty
covered by the review, un-
ments for only about 70 to
porting, "meaningful
rate depends on the daily
dervaluation occurred when a
80 per cent of the leases.
ties" for reporting of royal-
average production per well
simple sales price was taken.
Furthermore, the study said,
ties due and for late
-the greater the production,
the higher the rate.
The supervisor of each
were often the same compa-
ments (present penalties
Geological Survey area of
ny, "which makes the control
described as "meaning
The leases are sold in com-
fice, on the basis of produc-
mechanism unreliable."
separate accounting for
petitive bidding when they
tion reports by the lessees,
This confused reporting
tiple interests in a lease and
contain Reological structures
is empowered to set the
indicative of oil and gas
system is further fragmented
frequent reviews of accounts.
value on which royalties are
where a lease is held by
Most important, however,
potential. On non-competi-
to be paid.
several companies - all of
were the personnel recom-
tive leases-those on un-
known geologic structures-
In setting an "estimated
which are permitted to file
mendations: a 37-person in-
the production royalty is
reasonable value," the super-
separate reports on their pro-
crease in staff (eight nc-
visor is required to consider
portional ownership of pro-
countants and 29, clerks);
duction and royalties due.
creation of a team compris-
12½ per cent on both oil
"the highest price paid for
The area offices then com-
ing a lawyer, an engineer, an
and gas.
a part or a majority of pro-
pound the confusion by accu-
accountant and an economist
Total royalty proceeds are
duction of like quality in
mulating all the separate
to be responsible for value
not peanuts-smounting as
the same field, to the price
ownership statements into
tion of production in all
they did to $220-million in
received by the lessee, to
one "balance carry-forward
areas, and appointment inf A
posted prices and to other
amount" for the whole lease.
systems manager to oversee
1974. This was nearly double
relevant matters."
"As a result," the report
all aspects of a centralized
the 1973 figure because of
Thus the value for royalty
said, "the statement becomes
royalty accounting system
the sharp rise in the price
no one official is now in
computation is not necessar-
almost meaningless to the
of now oil following the Arab
lease interest holders and the
charge, the report
ily the sales price received
embargo imposed late in
The estimated cost inr
by the producer. However,
Geological Survey because
1973 and the subsequent
the review found that with
neither can readily differen-
added positions was
surge in the price of import-
tiate which portion of the
a year.
few exceptions, the Geolog-
ed oil. or this amount, $33.4-
That said, the Office of
ical Survey computed royal-
account balance carry-for-
million went to Indian tribes.
Audit and Investigation has
ties on the sale price. It par-
ward applies to each lease
The Federal income split
interest.
turned to investigating off
ticularly noted that, in setting
is 37.5 per cent to the states
The upshot was that "de-
shore practices, conducting
gas values, area offices gave
where the leases lie, to be
"virtually no consideration"
linquent balances were al-
a study of royalty collections
used for schools and high-
from leases on the outer con-
to area prices established by
lowed to accumulate until
ways; 52.5 per cent to the
tinental shelf.
the Federal Power Commis-
the Geological Survey deter-
Federal Reclamation Fund,
sion for sale of natural gas
mined royalties due from
in interstate commerce.
each lease interest and sub.
The review gave two
mitted appropriate billings."
causes for this situation-
In some cases, the study said,
lack of established guidelines
"years may elapse" between
for area offices and lack of
the account reviews.
capable staff.
This situation was respon-
As to reporting procedures,
sible, the report stated, for
the review found that "infor-
the large amount of late pay-
mation needed is not always
ments, although it added that
required to be submitted and
many companies had become
the information that is re-
"somewhat lax" about mak-
quired is not always submit:
ing payments within the re-
ted, or sometimes not sub.
quired month after produc-
mitted on time and ofter
tion. The total overdue
submitted in a. nonstandarc
amount in December, 1973,
format."
was $3.3-million, which re-
sulted in interest loss to the
Data, the review went on
comes in "from differen
Government for the year of
$104,000.
sources at different times
during the month." Thus, the
operator may submit a pro-
duction report; the lease
holder may submit a sales
the lessee and the purchaser
and royalty report, and the
various purchasers may, or
may not, submit statements
of their purchases.
The purchasers' statements
FORD
are the only method that
the Geological Survey has
of verifying the producer's
stated sales volumes and
LIBRAN
values. The trouble is that
the purchasers' statements
are not required and are sup-
plied, as the àudit stated,
AIÓ
AMERICANS for
INDIAN OPPOR TUNITY
1816 JEFFERSON PLACE, N.W., WASHINGTON, D.C. 20036
(202) 466-8420
The Honorable Gerald Ford
The White House
Washington, D.C. 20500