Inhofe, Lankford say new BIA rules threaten Osage oil operations

New US Bureau of Indian Affairs regulations that increase production expenses on tribal lands could put the Osage Nation out of business, Oklahoma’s two US senators told US Sec. of the Interior Sally Jewell.

The tribe is unique in Oklahoma since it retained a substantial mineral estate following statehood, Sens. James M. Inhofe (R) and James Lankford (R) said in their July 9 letter to the secretary. Production in Osage County has reached nearly 500,000 bbl/month in recent years, generating millions of dollars in revenue for the tribe’s head-right owners, they noted.

On May 11 BIA finalized new regulations that would increase costs for the tribe to produce oil, the senators said. They said the Osage Minerals Council (OMC) and the Osage Producers Association sued the bureau, citing expensive equipment updates that would require producers to pay $5/bbl more in royalties than what they would pay elsewhere, and increasing the bond a producer would have to pay.

“The new regulations that were recently finalized will not solve any of these problems,” Inhofe and Lankford said. “In fact, it is our view that they will actually make the problems worse.” They said BIA took some steps after hearing from the federal lawmakers’ offices, “but the farther these actions are behind us, the more they appear to be window dressing, rather than a good faith effort to fix the many existing problems.”

They said they were pleased that the US District Court for Northern Oklahoma blocked implementation of the regulations until it can hold a hearing on Aug. 10. “However, we believe it is imperative, particularly in light of your fiduciary duty to the [OMC], that you further suspend any plans to implement or enforce the regulations,” the senators told Jewell. “We request that you instead meet with us and other relevant stakeholders to craft a solution that is legitimately workable.”

Their letter continued complaints about BIA’s oversight of tribal energy and mineral resources. The DOI agency does not have data it needs to verify ownership of some Indian oil and gas resources, easily identify resources available for lease, or identify where leases are in effect, the Government Accountability Office said in a recent report (OGJ Online, June 16, 2015).

Contact Nick Snow at nicks@pennwell.com.

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