FMC and Tribal Regulatory Jurisdiction

FMC and the Shoshone-Bannock Tribes (Tribes) have had numerous issues arise related to the exercise of tribal jurisdiction for civil matters. FMC’s property within the Fort Hall Reservation is fee land and subject to state/county jurisdiction for some matters and federal jurisdiction for others. On environmental issues, federal laws such as CERCLA, Resource Conservation and Recovery Act (RCRA), Clean Water Act (CWA) and the Clean Air Act (CAA) apply. For local matters, such as fire and police response and property taxes, FMC is under the jurisdiction of Power County. In accordance with US Supreme Court precedent Montana v. United States, 450 U.S. 544 (1981), there is a presumption that tribal jurisdiction over the plant site does not exist.

Issues first arose between FMC and the Tribes in connection with the leases for phosphate ore that were obtained at the Gay Mine, located on Tribal land in the Fort Hall Reservation. The JR Simplot Company operated the Gay Mine from the time it opened in 1946 until the time it closed in 1993. In 1956, FMC entered into a number of phosphate ore leases with the Tribes and tribal members known as “allottees” because of their ownership of allotted (fee) lands that were passed down from family members resulting from the original allotment in 1911. These leases provided for rent payment and royalties to the Tribes and Tribal allottees based upon the volume of phosphate ore extracted. FMC and Simplot paid the Tribes and allottees over $60 million in rent and royalties during the Gay Mine’s operation.

In 1980, the US Supreme Court issued a decision that established the taxation authority of Indian tribes over non-members. Shortly after that decision came out, the Tribes proposed a tax on the volume of phosphate ore mined and removed from the Gay Mine. After negotiations, FMC, Simplot and the Tribes reached an agreement regarding the taxation of minerals at the Gay Mine.

Also in 1980, the Tribes adopted a Tribal Employment Rights Ordinance (TERO) that required a Tribal hiring preference at the Gay Mine, the plant site, as well as the payment of fees to the Tribal government based upon a percentage of the FMC’s payroll. Based on its significant employment of Tribal members and ongoing business relationship with the Tribes at the Gay Mine, FMC entered into a Compliance Agreement with the Tribes. However, after a disagreement arose about terms of that agreement, FMC challenged the TERO ordinance. That challenge was heard first in Tribal Court in 1987 and 1988, and later went to federal court on the question of the Tribes’ jurisdiction. The Ninth Circuit Court of Appeals held that FMC was subject to the Tribes’ civil jurisdiction to impose TERO fees under the first Montana exception, reasoning that FMC’s mineral leases at the Gay Mine constituted a “consensual relationship” and could subject FMC to TERO. The TERO fees were applied both to the Gay Mine operations and to the elemental phosphorus plant.

During the mid-1980s, the Tribes proposed to adopt a severance tax on the ore that was removed from the Gay Mine. FMC and the Tribes resolved a dispute about the amount of the tax through a Settlement Agreement dated Oct. 4, 1985, pursuant to which FMC agreed to pay an additional $100,000 per year to satisfy the Tribes’ tax ordinance. The Tribes did not adopt their Tribal Tax Code and submit it for Secretary of the Interior approval, as required under the Tribal Constitution, until 1991. In 1991, FMC began paying a severance tax to the Tribes.

By the 1990s, the Gay Mine ore supply was becoming depleted. In 1993, the mine was closed and the Tribes were no longer receiving rent, royalty, or tax payments from FMC. But FMC remained the largest private employer on the Reservation and the Tribes continued to receive plant-related TERO fees as direct revenue. Then, in August 1997, the Tribes proposed amendments to their Land Use Policy Ordinance that introduced a “waste permit” and fee that would be paid annually based upon the tons of solid and hazardous waste stored, treated, or disposed on FMC’s fee land inside the Reservation. FMC objected to the Tribes’ authority to impose the fee based upon the Tribes’ lack of jurisdiction.

Although FMC had entered into employment relationships and lease agreements with Tribal members and was therefore subject to TERO, federal law made clear that there must be a “nexus” between the consensual relationship and the proposed regulation. Thus, the Tribes’ waste fees, which could potentially exceed $180 million per year in perpetuity based upon the Tribes’ definition of “wastes,” were not applicable to FMC. FMC and the Tribes reached an understanding to resolve that dispute, pursuant to which FMC agreed to pay the Tribes $1.5 million per year as a waste generation fee in order to keep the plant operating.

During discussions about the waste fee with the Tribes, FMC was also involved with negotiating a Consent Decree with EPA that would address FMC’s obligation under a federal hazardous waste law termed RCRA. The Tribes actively took part in those negotiations. Those negotiations resulted in entry of a RCRA Consent Decree in 1999. Toward the close of the negotiations, the Tribes demanded that the US Department of Justice (DOJ) give them a portion of the RCRA penalties that FMC agreed to pay the US government, but DOJ declined the Tribes request. The Tribes then reversed their support of the RCRA Consent Decree and actively opposed it — the Ninth Circuit Court of Appeals ultimately rejected the Tribes’ appeal, United States v. FMC Corp., 229 F.3d 1161 (9th Cir. 2000) (unpublished disposition).

Meanwhile, FMC continued to pay the $1.5 million waste fee until the elemental phosphorus plant shut down in December 2001. In May 2002, FMC sent a notice to the Tribes stating that FMC would not pay the fee due to the plant closure and the fact that it was no longer generating waste. The Tribes did not respond to FMC’s notice.

In 2005, as FMC was nearing completion of the work that was required under the RCRA Consent Decree, the Tribes filed a motion in federal court claiming that FMC was in violation of Tribal law due to its failure to obtain a waste permit and pay a waste permit fee. FMC contested the Tribes’ argument in federal court and argued that (1) the Tribes lacked jurisdiction to require FMC to obtain a waste permit, and (2) no Tribal ordinance had ever been adopted that required a waste permit or fee. The Tribes had never formally adopted and obtained Secretary of the Interior approval of any land use or other ordinance that provided for a waste permit fee. The federal court determined that all arguments regarding the applicability of Tribal ordinances should be addressed first in the Tribal forum (Tribal Land Use Commission, Fort Hall Business Council, Tribal Courts) and issued an order on March 6, 2006 that required FMC to submit applications for Tribal permits. The federal court also made a preliminary determination that the Tribes had civil jurisdiction over FMC to enforce Tribal permitting requirements.

Complying with the District Court’s decision FMC submitted those applications to the Tribes, which issued the permits in April 2006. Those permits required that FMC pay fees that could exceed $100 million per year. The Tribes’ Land Use Policy Commission (LUPC) later revised the waste permit fee to establish the fee at $1.5 million, based upon the prior payment by FMC to the Tribes. FMC filed an appeal with the Tribes regarding the waste permit fee, but the LUPC and FHBC rejected FMC’s appeal. On further review to the tribal court, however, FMC prevailed. The Tribes appealed to the Tribal Appellate Court which heard oral arguments on November 4, 2010 and a decision is pending.

Meanwhile, FMC appealed the federal district court’s decision to the Ninth Circuit. The Ninth Circuit agreed with FMC that the Tribes were not a party to the RCRA Consent Decree and that under federal law, only the U.S. government has the authority to seek enforcement of a RCRA Consent Decree, U.S. v. FMC Corp., 531 F.3d 813, 815 (9th Cir. 2008). The Tribes lacked standing under the RCRA Consent Decree and therefore the Ninth Circuit vacated the federal district court’s decision.

Legal proceedings are continuing in the Tribal Court of Appeals. The Tribes are asking the Tribal Court of Appeals to retroactively reinstate the waste permit and $1.5 million fee to the plant’s closure in 2001. The question of tribal jurisdiction has not yet been decided. Any final decision by the Tribal Court of Appeals on the question of tribal jurisdiction is subject to further review in the US federal courts.