Calyx Energy, based in Tulsa, filed multiple applications on April 29, 2020, to drill on land in Hughes County; the applications requested multiunit horizontal wells, well location exceptions, increased well density, pooling, and exceptions to spacing requirements.
Two days later Canaan Resources X, a branch of a Delaware company, protested every one of those applications. Canaan contended that the McGirt ruling divested the Oklahoma Corporation Commission of any oil/gas regulatory authority within the Muscogee (Creek) reservation.
An administrative law judge for the commission recommended approval of all of the applications; Canaan filed exceptions to the ALJ’s recommendations. The Corporation Commission referred Canaan’s protest to an oil and gas appellate referee.
The referee noted that Canaan “seeks to extend the findings of McGirt” – a case involving a Native American who committed a felony crime in “Indian Country” – “to include all civil jurisdiction, including oil and gas regulation within the original boundaries of the Creek reservation to the Creek Tribe, and, by extension, for all applications to all the reservations of the Five Tribes.”
The referee rejected Canaan’s argument. And the Corporation Commission ruled that, absent a threat or direct effect on “the political integrity, economic security or health and welfare” of a Native American tribe, “no tribe has the sovereign right to intervene in the regulation of oil and gas property rights by the Commission.”
Canaan appealed the commission’s ruling to the state Supreme Court but was placed in receivership in December 2020. Canaan dismissed its appeal on December 30, 2021, “as all issues have been resolved through the acquisition of the assets in question” by Calyx Energy III from Canaan Resources X, court records show.
Canaan Resources’ appeal of the Corporation Commission’s favorable ruling on Calyx Energy’s applications was not entirely unforeseeable.
In a criminal case that featured the same tribal jurisdictional issues as McGirt and was decided by the 10th Circuit U.S. Court of Appeals four years ago, the Oklahoma Independent Petroleum Association submitted a “friend of the court” legal brief.
The OIPA said its members felt compelled to express their views “due to the broad impact that this case may have not just on criminal matters in Oklahoma, but also on the existing regulatory authority the State of Oklahoma maintains.”
For example, the OIPA wrote, the Oklahoma Corporation Commission “has historically maintained authority over oil and gas production on state and private lands in Oklahoma. But tribal lands – including reservation land – are regulated by the Department of the Interior, raising questions of whether regulatory permitting was submitted to the appropriate agency.”
Taxation issues could be disrupted, too, the OIPA argued. “[O]il and gas production taxes, which have been paid to Oklahoma for years, may now be subject to taxation by both” the state and the tribe if a well is located within the boundaries of a tribal reservation.
Similarly, the Oklahoma Oil and Gas Association asserted that, “Not only would OKOGA’s members potentially be subject to tribal taxation on severance of oil and gas … but they also might be subject to ‘dual’ state and tribal taxation.”
(The OIPA and the OKOGA subsequently merged to create The Petroleum Alliance.)
“The heart of the legal issue” in the Calyx/Canaan case “really relates to the 1947 Stigler Act and a broad set of federal cases,” said Stephen Greetham, senior counsel for the Chickasaw Nation.
Under the Stigler Act, the restricted status of land allotted to the so called Five Civilized Tribes of Oklahoma was maintained only if the individual holding title had at least 50% Indian blood from one of the Five Tribes (the Choctaw, Chickasaw, Creek, Cherokee, and Seminole tribes). When land is in restricted status, it is not subject to taxation and may not be sold or transferred without permission of the Department of the Interior.
H.R. 2606, the Stigler Act Amendments of 2018, removed that requirement. Consequently, the restricted status is maintained for lineal descendants of an original enrollee whose name appears on the membership rolls of the Five Tribes.