Cotton Petroleum Corporation v. New Mexico/Dissent Blackmun
Justice BLACKMUN, with whom Justice BRENNAN and Justice MARSHALL join, dissenting.
Although the Jicarilla Apache Tribe is not a party to the appeal, this case centrally concerns "the boundaries between state regulatory authority and [the Tribe's] self-government." White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 141, 100 S.Ct. 2578, 2582, 65 L.Ed.2d 665 (1980). The basic principles that define those boundaries are well established. The Court today, while faithfully reciting these principles, is less faithful in their application.
Pre-emption is essentially a matter of congressional intent. In this case, our goal should be to determine whether the State's taxation of Cotton Petroleum's reservation oil production is consistent with federal Indian policy as expressed in relevant statutes and regulations. First and foremost, we must look to the statutory scheme Congress has established to govern the activity the State seeks to tax in order to see whether the statute itself expresses Congress' views on the question of state taxation. As the discussion in Part I below reveals, the statute most relevant to this case makes clear that Congress intended to foreclose the kind of tax New Mexico has imposed. Second, we must consider other indications of whether federal policy permits the tax in question. Part II below demonstrates that, under established principles, state taxation is pre-empted by federal and tribal interests in this case. Because the record is more than adequate to demonstrate the pre-emptive force of federal and tribal interests, I dissent. 
* The most relevant statute is the Indian Mineral Leasing Act of 1938, 52 Stat. 347, 25 U.S.C. § 396a et seq. (1938 Act), pursuant to which the Jicarilla Apache entered into mineral leases with appellant Cotton Petroleum. The 1938 Act is silent on the question of state taxation. But, as interpreted by this Court in Montana v. Blackfeet Tribe, 471 U.S. 759, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985), the silence of the 1938 Act is eloquent and argues forcefully against the result reached by the majority.
In Montana, the State sought to tax the Blackfeet Tribe's royalty interests under oil and gas leases held, pursuant to the 1938 Act, by non-Indian lessees operating on the reservation. The State sought to do so despite the fact that the 1938 Act contains no express authorization for any state tax on such leases. The State based its claim of taxation uthority on a 1924 statute enacted to permit oil and gas leasing on Indian reservations created by treaty.  Act of May 29, 1924, ch. 210, 43 Stat. 244, 25 U.S.C. § 398 (1924 Act). The 1924 Act contained a proviso that "the production of oil and gas and other minerals on such lands may be taxed by the State in which said lands are located in all respects the same as production on unrestricted lands, and the Secretary of the Interior is authorized and directed to cause to be paid the tax so assessed against the royalty interests on said lands." The State took the position that the 1938 Congress could not be presumed by mere silence to have abrogated the law permitting state taxation. 471 U.S., at 765-766, 105 S.Ct., at 2402-2403.
In Montana, we squarely rejected the State's argument. After noting that the 1938 Act was "comprehensive legislation," id., at 763, 105 S.Ct., at 2401, containing a general repealer of all statutory provisions " 'inconsistent herewith,' " id., at 764, 105 S.Ct., at 2402, quoting § 7 of the 1938 Act, see note following 25 U.S.C. § 396a, we held that, under the canons of construction applicable to laws governing Indians, the general repealer clause could not be taken as implicitly incorporating consistent provisions of earlier laws. Rather, in the Indian context, clear congressional consent to state taxation was required and, on that point, we found no "indication that Congress intended to incorporate implicitly in the 1938 Act the taxing authority of the 1924 Act." 471 U.S., at 767, 105 S.Ct., at 2404. Interpreting the 1938 Act as preserving the taxing authority of the 1924 Act, we held, would not "satisfy the rule requiring that statutes be construed liberally in favor of the Indians." Ibid. In addition, we observed that such an interpretation would undermine the purposes of the 1938 Act as reflected in its legislative history: to achieve uniformity in tribal leasing, to harmonize tribal leasing with the goals of the Indian Reorganization Act, Act of June 18, 1934, ch. 576, § 16, 48 Stat. 987, codified at 25 U.S.C. § 476 et seq. (IRA), and "to ensure that Indians receive 'the greatest return from their property.' " 471 U.S., at 767, n. 5, 105 S.Ct., at 2404, n. 5.
The majority appropriately acknowledges that Congress knew when it enacted the 1938 Act that a statute governing tribal leases that failed expressly to authorize state taxation of Indian royalty interests would have the effect of leaving the States without the power to tax those interests. Ante, at 183, n. 14. Thus, the clear import of our decision in Montana is that Congress' silence in 1938 expressed an intent substantially to narrow state taxing authority.
But the majority takes the position that the 1938 Act's silence means something completely different when it comes to the kind of taxation at issue here, and expends considerable energy attempting to support that view. The majority argues that the same silence that reflected an intent to prohibit state taxation of Indian tribes' royalty interests was "fully consistent with an intent to permit state taxation of non-member lessees," ante, at 183 (emphasis added). The majority notes that when the pre-1938 mineral-leasing statutes were enacted (including the 1927 Act, 44 Stat. 1347, 25 U.S.C. § 398a et seq., which is of the greatest relevance here, see n. 2, supra ), express congressional authorization was required not only for direct taxes on Indians (or other "sovereigns"), but also for taxes on those who contracted with Indians. See, e.g., Gillespie v. Oklahoma, 257 U.S. 501, 42 S.Ct. 171, 66 L.Ed. 338 (1922) (applying intergovernmental immunity doctrine to a tax on the net income of the non-Indian holder of a reservation mineral lease). In contrast, "[b]y the time the 1938 Act was enacted, . . . Gillespie had been overruled and replaced by the modern rule permitting such taxes absent congressional disapproval." Ante, at 182. From this, the majority infers that because Congress knew in 1938 that it could maintain the pre-1938 status quo regarding lessee taxation simply by saying nothing, Congress' silence is consistent with an intent to maintain that status quo.
The argument that the 1938 congressional silence regarding lessee taxation is consistent with an intent to permit such taxation cannot, for two reasons, withstand close scrutiny. First, even if the majority is correct in seeking the meaning of Congress' silence in changes in this Court's intergovernmental tax immunity jurisprudence, the facts defeat the majority's theory. Second, and fundamentally, the majority's court-centered approach fails to give due weight to a far more significant intervening event: the major change in federal Indian policy embodied in the IRA.
The case which overruled Justice Holmes' opinion for the Court in Gillespie was Helvering v. Mountain Producers Corp., 303 U.S. 376, 58 S.Ct. 623, 82 L.Ed. 907 (1938). Mountain Producers was decided on March 7, 1938. The majority, indeed, is correct that the 1938 Act was enacted on May 11, 1938, after that case was decided. But a review of the history of the 1938 Act reveals that it had assumed final form well before this Court's decision in Mountain Producers. The majority's chronology thus is somewhat misleading, at least if the realities of the legislative process are to have any relevance to the analysis of legislative intent.
The 1938 Act was drafted by the Department of the Interior and was submitted to the respective Committees on Indian Affairs of the House and Senate on June 17, 1937. See S.Rep. No. 985, 75th Cong., 1st Sess., 1 (1937) (Senate Report); H.R.Rep. No. 1872, 75th Cong., 3d Sess., 1 (1938) (House Report).  The proposed bill was reported out of the Senate Committee in July 1937, with a recommendation that it be passed without amendment. Senate Report, at 1. The bill was passed by the Senate without debate on August 6, 1937. See 81 Cong.Rec. 8399. The bill was reported out of the House Committee on Indian Affairs on March 3, 1938, again with a recommendation that it pass without amendment. House Report, at 1. All this took place before the March 7, 1938, decision in Mountain Producers, during a period in which, the majority acknowledges, the proposed statute's silence on the question of taxation would have meant that the States had no power to tax non-Indian lessees' oil and gas production. The House passed the bill, also without debate, on May 2, 1938. See 83 Cong.Rec. 6057-6058.
Thus, although the majority is technically correct that the 1938 Act did not become law until after the announcement of this Court's decision in Mountain Producers, the legislation was formulated, considered by the House and Senate Committees, referred out of the Committees without amendment, and passed by the Senate, all before Mountain Producers on March 7, 1938, changed the law of intergovernmental tax immunity. Up until that point, the clear meaning of the statute, as our decision in Montana makes clear, is that the State lacked power to impose the tax at issue in this case. There is no evidence that the change in the law wrought by Mountain Producers was brought to the attention of the House. It defies historical sense to make Mountain Producers the centerpiece of the interpretation of a statute which reached final form before Mountain Producers was decided. 
The Court in Montana put forward a more sensible explanation of the absence of state taxation authority in the 1938 Act. As the relevant House and Senate Reports explain, the 1938 Act was crafted, proposed, and enacted in light of the recently enacted IRA. The IRA worked a fundamental change in federal Indian law marked by two principal goals: " 'to rehabilitate the Indian's economic life and to give him a chance to develop the initiative destroyed by a century of oppression and paternalism.' " Mescalero Apache Tribe v. Jones, 411 U.S. 145, 152, 93 S.Ct. 1267, 1272, 36 L.Ed.2d 114 (1973), quoting H.R.Rep. No. 1804, 73d Cong., 2d Sess., 6 (1934). In reviewing pre-1934 Indian mineral-leasing statutes, the Interior Department found them wanting in both respects. The statutes not only gave the Indians no "voice" in the granting of leases, but also were not "adequate to give Indians the greatest return from their property." House Report, at 2; Senate Report, at 2. The 1938 Act was proposed to "bring all mineral-leasing matters in harmony with the Indian Reorganization Act" in these respects. House Report, at 3; Senate Report, at 3. The Court observed in Montana that "these purposes would be undermined" by treating the 1938 Act as explicitly or implicitly leaving the taxation provisions of prior statutes in force. 471 U.S., at 767, n. 5, 105 S.Ct., at 2404, n. 5. 
The majority's observation, ante, at 182, that "[t]here is . . . no history of tribal independence from state taxation of these lessees to form a 'backdrop' against which the 1938 Act must be read" cannot be dispositive. The IRA, enacted only a few years before the 1938 Act, is itself sufficient "backdrop" to inform our interpretation, for the IRA marked the rejection of all the assumptions upon which prior statutes providing for state taxation of reservation mineral production had been based.
The expectation that animated Indian policy under the General Allotment Act of 1887, ch. 119, 24 Stat. 388, was that at the expiration of a 25-year trust period, there would be no difference between Indians and other citizens: tribal life would come to an end, the Indians would be assimilated and fully subject to state governmental authority, Indian lands would be freely alienable to non-Indians and subject to state taxation, and surplus lands would be opened to private development. See generally F. Cohen, Handbook of Federal Indian Law 131-132 (1982); Readjustment of Indian Affairs: Hearings on H.R. 7902 before the House Committee on Indian Affairs (History of the Allotment Policy), 73d Cong., 2d Sess., pt. 9, pp. 428-489 (1934); Blackfeet Tribe v. Montana, 729 F.2d 1192, 1195 (CA9 1984), aff'd, 471 U.S. 759, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985).
With the passage of time, eventual state control remained the goal of the allotment policy, but delays in the full implementation of that policy became a matter of concern to the States. This was particularly evident in the area of mineral leasing. Such leasing for periods of up to 10 years had been authorized by statute in 1891, Act of Feb. 28, 1891, ch. 383, § 3, 26 Stat. 795, but it became increasingly clear that longer-term leases were an economic necessity. A pattern soon developed: in return for Congress' extending the period during which mineral rights would be reserved to the Indian tribes, States were given the power to tax mineral production. See 3 Indians of the United States, Hearings before a Subcommittee of the House Committee on Indian Affairs 191-192, 281, 444-445 (1920). The taxation proviso in the 1924 Act, which was included at the insistence of members of the Subcommittee, was true to that pattern. See H.R. No. 386, 68th Cong., 1st Sess. (1924); see generally Brief for United States as Amicus Curiae in Montana v. Blackfeet Tribe, O.T.1983, No. 83-2161, pp. 16-26.
By 1927, when Congress addressed the problem of oil and gas leasing on Executive Order reservations, the States were anxious to open those lands for mineral development and the debate in Congress squarely addressed the conflicting interests of States and Indian tribes. The Attorney General had issued a controversial opinion that the Mineral Lands Leasing Act of 1920, 41 Stat. 437, did not apply to Executive Order reservations, 34 Op.Atty.Gen. 181 (1924) (opinion of then-Attorney General Harlan F. Stone), and the matter was in litigation. See Development of Oil and Gas Mining Leases on Indian Reservations, Hearings on S. 1722 and S. 3159 before the Subcommittee of the Senate Committee on Indian Affairs, 69th Cong., 1st Sess., 29-30 (1926). If the Attorney General's position did not prevail in the courts, the Indians would receive no income from mineral production on Executive Order reservations, and any claim of Indian entitlement to those reservations would be substantially undermined. In that uncertain legal climate, the 1927 Act is best viewed as a compromise: Indian interests acquiesced in the States' claim that they had a right to increase their general revenues by sharing in the profits of reservation mining activities; in return, the Indians avoided legislation that would have obliterated any hope of obtaining recognition of their legal entitlement to Executive Order lands. See id., at 9, 55, 61, 63, 98-99. See also Hearings on S. 3159 and S. 152, Senate Committee on Indian Affairs, 69th Cong., 1st Sess., 14, 24-25, 33-34 (1926). 
The political climate changed dramatically with the passage in 1934 of the IRA in which " '[t]he policy of allotment and sale of surplus reservation land was repudiated' " as antithetical to tribal interests. Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 479, 96 S.Ct. 1634, 1644, 48 L.Ed.2d 96 (1976), quoting Mattz v. Arnett, 412 U.S. 481, 496, n. 18, 93 S.Ct. 2245, 2253-2254, n. 18, 37 L.Ed.2d 92 (1973). It would be a mistake to impute the political compromises of the allotment period into legislation enacted soon after the passage of the IRA, legislation expressly tailored to bring Indian mineral policy into line with a radically altered set of assumptions about the political and economic future of the Indians.
Furthermore, the IRA embodied an approach to tribal independence which would be undone by limiting Indian tribes to those powers they had been permitted to exercise in the past. The Department of the Interior, in interpreting the IRA at Congress' request, realized that the assertions of Indian autonomy that the IRA sought to foster would seem novel, and would likely come at the expense of settled state expectations.
"It is a fact that State governments and administrative officials have frequently trespassed upon the realm of tribal autonomy, presuming to govern the Indian tribes through State law or departmental regulation or arbitrary administrative fiat, but these trespasses have not impaired the vested legal powers of local self-government which have been recognized again and again when these trespasses have been challenged by an Indian tribe. 'Power and authority rightfully conferred do not necessarily cease to exist in consequence of long non-user'. . . . The [IRA], by affording statutory recognition of these powers of local self-government and administrative assistance in developing adequate mechanisms for such government, may reasonably be expected to end the conditions that have in the past led the Interior Department and various State agencies to deal with matters that are properly within the legal competence of the Indian tribes themselves." Powers of Indian Tribes, 55 I.D. 14, 28-29 (1934).
The Department noted: "Chief among the powers of sovereignty recognized as pertaining to an Indian tribe is the power of taxation." Id., at 46. It would be entirely consistent with the spirit of the IRA for the Department, and for Congress, to have done away with the express authorization of state taxation in order to leave room for Indians to operate in the sphere of taxation unimpeded by the States. That Indians had never before asserted the right to freedom from state taxation was simply a product of the unfortunate state of affairs that the IRA sought to remedy.
In sum, we are given to choose between two possible interpretations of the silence of the 1938 Act. One, adopted by the majority, focuses on the change in this Court's intergovernmental immunity doctrine which took place at the very end of the process leading to the 1938 Act. The other focuses on a fundamental change in congressional Indian policy which took place shortly before the process began, and was expressly noted as its motivating force. The latter interpretation is clearly the more compelling. I must conclude that, contrary to the majority's view, the silence of the 1938 Act is not consistent with a congressional intent that non-Indian lessees of Indian mineral lands shall be subject to state taxation for their on-reservation activities.  This conclusion does not constitute, as the majority says, "return to [the] long-discarded and thoroughly repudiated doctrine" of constitutional intergovernmental tax immunity. Ante, at 187. Rather, it reflects a fuller understanding of the policies underlying federal Indian law in the mid- to late-1930's and continuing, in relevant part, into the present time.
Even if we did not have such direct evidence of Congress' intent to preclude state taxation of non-Indian oil production on Indian lands, that conclusion would be amply supported by a routine application of the traditional tools of Indian pre-emption analysis. The majority concludes otherwise because it distorts the legal standard it purports to apply. Instead of engaging in a careful examination of state, tribal, and federal interests required by our precedents, see e.g., Ramah Navajo School Board, Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832, 838, 102 S.Ct. 3394, 3398-3399, 73 L.Ed.2d 1174 (1982), the majority has adopted the principle of "the inexorable zero." Teamsters v. United States, 431 U.S. 324, 342, n. 23, 97 S.Ct. 1843, 1858 n. 23, 52 L.Ed.2d 396 (1977). Under the majority's approach, there is no pre-emption unless the States are entirely excluded from a sphere of activity and provide no services to the Indians or to the lessees they seek to tax. That extreme approach is hardly consistent with the "flexible" standard the majority purports to apply. Ante, at 184.
The Court has identified "two independent but related barriers to the assertion of state regulatory authority over tribal reservations." White Mountain Apache Tribe v. Bracker, 448 U.S., at 142, 100 S.Ct., at 2583. The exercise of state authority may be impermissible solely on the ground that the state intervention would interfere with "the right of reservation Indians to make their own laws and be ruled by them." Williams v. Lee, 358 U.S. 217, 220, 79 S.Ct. 269, 270-271, 3 L.Ed.2d 251 (1959). Alternatively, state law may be pre-empted by the existence of a comprehensive federal regulatory scheme governing the subject matter. See, e.g., Warren Trading Post Co. v. Arizona Tax Comm'n, 380 U.S. 685, 688-690, 85 S.Ct. 1242, 1244-1245, 14 L.Ed.2d 165 (1965). These methods of analysis overlap. Indian sovereignty is not a "platonic" concept. McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 172, 93 S.Ct. 1257, 1262, 36 L.Ed.2d 129 (1973). It is a growing tradition, actively supported by federal legislation. Our pre-emption cases recognize that "federal law . . . reflects . . . related federal and tribal interests," and that "the . . . encouragement of [Indian] sovereignty in congressional Acts promoting tribal independence and economic development" must inform our pre-emption analysis. Ramah Navajo, 458 U.S., at 838, 102 S.Ct., at 3398-3399. In this case, all the elements that traditionally have resulted in a finding of federal pre-emption are present.
Federal regulation of leasing of Indian oil lands "is both comprehensive and pervasive." Id., at 839, 102 S.Ct., at 3399. Provisions of the 1938 Act regulate all stages of the process of oil and gas leasing and production on Indian reservations. The auction or bidding process through which leases are acquired is supervised by the Department of the Interior. 25 U.S.C. § 396b. Successful lessees must furnish a bond to secure compliance with lease terms, § 396c, and each les ee's operations are in all respects subject to federal rules and regulations, § 396d. Longstanding regulations promulgated pursuant to the 1938 Act govern the minute details of the bidding process, 25 CFR § 211.3 (1988), and give the Secretary of the Interior the power to reject bids that are not in the best interest of the Indian lessor, § 211.3(b). Federal law sets acreage limitations, § 211.9, the term of each lease, § 211.10, and royalty rates, methods, and times of payment, §§ 211.13 and 211.16. Turning to the regulation of the lessee's operations, federal law controls when operations may start, § 211.20, and federal supervisory personnel are empowered to ensure the conservation of resources and prevention of waste, §§ 211.19-211.21. Additional restrictions are placed on lessees by the Federal Oil and Gas Royalty Management Act of 1982, 96 Stat. 2447, 30 U.S.C. § 1701 et seq., which further safeguards tribal interests by imposing additional inspection, collection, auditing, security, and conservation requirements on lessees.
In addition, the Jicarilla Apache, as expressly authorized by their Constitution, have enacted regulations of their own to supplement federal guidelines, and have created a tribal Oil and Gas Administration to exercise tribal authority in this area.  See Jicarilla Apache Tribal Code, Tit. 18, ch. 1, §§ 1-7 (1987) and their Revised Constitution, Art. XI, § 1(a)(3). Indeed, just as we earlier found of the Mescalero Apache: "The Tribe has engaged in a concerted and sustained undertaking to develop and manage the reservation's . . . resources specifically for the benefit of its members." New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 341, 103 S.Ct. 2378, 2390, 76 L.Ed.2d 611 (1983).
The majority acknowledges that federal and tribal regulations in this case are extensive. But because the District Court found that the State regulates spacing and the mechanical integrity of wells, and that federal and tribal regulations are therefore not "exclusive," the majority concludes without further ado that there is sufficient state activity to support the State's claimed authority to tax.  The majority's reliance on the proposition that "[t]his is not a case in which the State has had nothing to do with the on-reservation activity, save tax it," ante, at 186, reflects a mechanical and absolutist approach to the delicate issue of pre-emption that this Court expressly has repudiated. White Mountain Apache, 448 U.S., at 145, 100 S.Ct., at 2584. "[C]omplete abdication or noninvolvement," ante, at 185, has never been the applicable standard.
The taxes the State seeks to impose "would threaten the overriding federal objective of guaranteeing Indians that they will 'receive . . . the benefit of whatever profit [their oil and gas reserves are] capable of yielding,' " and would "reduc[e] tribal revenues and diminis[h] the profitability of the enterprise for potential contractors." White Mountain Apache, 448 U.S., at 149, 100 S.Ct., at 2586-2587. State taxes would also reduce the funds available to oil and gas producers to meet the financial obligations placed upon them by the extensive federal and tribal regulatory schemes. Ibid. Tribal and federal regulations clearly leave no room for these taxes. See id., at 151, n. 15, 100 S.Ct., at 2587-2588, n. 15.
Just as the majority errs by adopting a standard of "exclusivity," it places undue significance on the fact that the State made some expenditures that benefited Cotton Petroleum's on-reservation activities.  Concededly, the State did spend some money on the reservation for purposes directly and indirectly related to oil and gas production. It is clear on this record, however, that the infrastructure which supports oil and gas production on the Jicarilla Apache Reservation is provided almost completely by the federal and tribal governments rather than by the State. Indeed, the majority appears to accept the fact that the state taxes are vastly disproportionate, ante, at 185, as well it must: $89,384 in services, as compared with $2,293,953 in taxes, speaks for itself.  But the majority deems this fact legally irrelevant in order to avoid imposing a "proportionality requirement" that would be inconsistent with the notion that taxation is not based on a quid pro quo. Ante, at 185, n. 15. That notion, drawn from Due Process and Commerce Clause analysis, see ante, at 189-190, is inapposite in the pre-emption context. Pre-emption analysis calls for a close consideration of conflicting interests and of their potential impact on one another. Under the majority's analysis, insignificant state expenditures, reflecting minimal state interests, are sufficient to support state interference with significant federal and tribal interests. The exclusion of all sense of proportion has led to a result that is antithetical to the concerns that animate our Indian pre-emption jurisprudence.
Finally, the majority sorely underestimates the degree to which state taxation of oil and gas production adversely affects the interests of the Jicarilla Apache. Assuming that the Tribe continues to tax oil and gas production at present levels, on-reservation taxes will remain 75% higher (14% as opposed to 8% of gross value) than off-reservation taxes within the State. The state trial court was not disturbed by this fact: it fou d that Cotton Petroleum had plans to dig new wells, and took that to be proof positive that the taxes imposed by the State did not deter drilling. But the court failed to recognize that Cotton Petroleum's new wells were infield (or "infill") wells, drilled between existing producing wells to increase the efficiency of drainage on lands already leased. Tr. 41-42, 68; see H. Williams & C. Meyers, Oil and Gas Terms 468 (7th ed. 1987). An infill well is essentially a no-risk proposition, in that there is little doubt that the well will be productive. Therefore, Cotton Petroleum's willingness to drill infill wells does not reflect its willingness to develop new lands. Federal and tribal interests legitimately include long-term planning for development of lease revenues on new lands, where there is greater economic risk, see Tr. 450, and a greater probability that difference in tax rates will have an adverse effect on a producer's willingness to drill new wells and on the competitiveness of Jicarillaleases. Id., at 68, 504. "[B]oth the rate at which mining companies acquire Indian land leases and the rate at which they develop them are dependent on the future balance between the deterrents to and the advantages of Indian land leasing. Where the balance will be struck cannot be predicted, for there are simply too many variables involved." Federal Trade Commission, Staff Report on Mineral Leasing on Indian Lands 48 (1975) (FTC Report). Dual state and tribal taxation inevitably affects that balance.
In weighing the effect of state taxation on tribal interests, logic dictates that it is necessary to consider not only the size of the tax, but also the importance of the taxed activity to the tribal economy. See California v. Cabazon Band of Mission Indians, 480 U.S. 202, 218, 107 S.Ct. 1083, 1093, 94 L.Ed.2d 244 (1987) (noting, in invalidating state regulation of tribal bingo operations, that bingo games constituted the sole source of tribal income). In this case, too, it is undisputed that oil and gas production is the Jicarilla Apache economy-a common pattern in reservations with substantial oil and gas reserves. See Tr. 159 (oil and gas royalties account for 90% of tribal income); FTC Report, at 10; Anders, Indians, Energy, and Economic Development, 9 J. Contemp. Business 57 (1980).
Furthermore, where, as here, the Tribe has made the decision to tax oil and gas producers, the long-term impact of state taxation on the Tribe's freedom of action in the sphere of taxation must also be considered.  Tribal taxation has been widely perceived as necessary to protect Indian interests.  The fact that the Jicarilla Apache have seen fit to impose their own taxes renders the threat to tribal interests which is always inherent in state taxation all the more apparent.  The market can bear only so much taxation, and it is inevitable that a point will be reached at which the State's taxes will impose a ceiling on tribal tax revenues. That the Jicarilla Apache have not yet raised their taxes to a level at which the combined effect of tribal and state taxation has been proved to diminish tribal revenues cannot be dispositive. Our decisions have never required a case-specific showing that state taxation in fact has deterred tribal activity; the potential for conflict is sufficient.
The majority observes that this is not "a case in which an unusually large state tax has imposed a substantial burden on the Tribe," ante, at 186, and deems the tribal interest "indirect and . . . insubstantial," ante, at 187. But the majority does not explain why interferences with federal policy of only the dramatic magnitude of the tax at issue in Montana v. Crow Tribe, 484 U.S. 997, 108 S.Ct. 685, 98 L.Ed.2d 638 (1988), meet the pre-emption threshold. In Warren Trading Post Co. v. Arizona Tax Comm'n, 380 U.S., at 691, 85 S.Ct., at 1245-1246, the Court rejected a 2% tax on the gross proceeds of a non-Indian trader on an Indian reservation because it put "financial burdens on [the trader] or the Indians . . . in addition to those Congress or the tribes have prescribed, and could thereby disturb and disarrange the statutory plan Congress set up in order to protect Indians." Indeed, the dissenters in White Mountain Apache, characterized the less-than-1% tax struck down in that case as "relatively trivial" and "unlikely to have a serious adverse impact on the tribal business," 448 U.S., at 159, 100 S.Ct., at 2591 (STEVENS, J., dissenting). That the tax burden was held sufficient to support a finding of pre-emption in White Mountain Apache and Warren Trading Post undermines the majority's position here.
In sum, under established Indian pre-emption principles, the case before us should have been straightforward. We deal here with state taxes on oil producers engaged in the development of the natural resource upon which the economic future of the Jicarilla Apache depends. The federal statute governing the producers' activities, unlike its historical predecessors, contains no express authorization of state taxation. That statute was enacted in a period in which concern with tribal sovereignty and tribal self-sufficiency was at the very core of federal Indian policy. Pursuant to that statute, the Federal Government regulates every aspect of the producers' activities to advance the Indians' best interests. The statute also encourages tribes to assert their own sovereign authority in this area; the Jicarilla Apache have done so through regulation and taxation. On the other side of the balance, New Mexico asserts little more than a desire to increase its general revenues at the expense of tribal economic development. That purpose "is insufficient to justify the additional burdens imposed by the tax on the comprehensive federal scheme . . . and on the express federal policy of encouraging Indian self-sufficiency in [this] area." Ramah Navajo, 458 U.S., at 845, 102 S.Ct., at 3402.
I respectfully dissent.
^1 The Court today addresses, in addition to pre-emption, the question whether the Interstate Commerce Clause applies to problems of multiple state and Indian taxation. I agree with the majority's conclusion in Part V of its opinion that an Indian tribe is not to be equated with a State for purposes of the Interstate Commerce Clause. It would seem to follow that the Clause has no application to this case. I thus see no purpose in the majority's detailed application of Interstate Commerce Clause analysis in Part IV of its opinion.
^2 The Blackfeet Reservation is a treaty reservation. In contrast, the Jicarilla Apache Reservation was created by Executive Order dated February 11, 1887. See 1 C. Kappler, Indian Affairs, Laws and Treaties 875 (1904). Congress enacted legislation in 1927 to govern oil and gas leasing of lands on Executive Order reservations. Indian Oil Act of 1927, ch. 299, § 1 et seq., 44 Stat. 1347, codified at 25 U.S.C. § 398a et seq. (1927 Act). The 1927 Act, like the 1924 Act, contained a taxation provision: it gave States the power to tax "improvements, output of mines or oil and gas wells, or other rights, property, or assets of any lessee upon lands within Executive Order Indian reservations in the same manner as such taxes are otherwise levied or collected." § 398c.
^3 The 1938 Act began to take form in 1935 and 1936. See, e.g., 79 Cong.Rec. 7815 (1935) (concerning S. 2638). From the beginning, this legislation was drafted and promoted by the Department of the Interior, and the Department stated that the intent of the proposed legislation was to harmonize federal leasing law with the IRA "and the policy of the Government thereunder for the organization and rehabilitation of Indian tribes and tribal matters." Letter dated March 26, 1936, regarding S. 2638, from Secretary Harold L. Ickes to Rep. Will Rogers, Chairman of the House Committee on Indian Affairs, reprinted in App. to Brief for Petitioner in Montana v. Blackfeet Tribe, O.T. 1983, No. 83-2161, p. 6.
^4 The inference the majority seeks to draw from the chronology of the 1938 Act is further weakened by an analysis of Mountain Producers itself. That case concerned federal taxation of income received by a private developer from an oil and gas lease of land owned by the State of Wyoming. In holding that the tax on the lessee's profits was not barred by the intergovernmental tax immunity, the Court expressly overruled Gillespie. See 303 U.S., at 387, 58 S.Ct., at 628. Both Gillespie and Mountain Producers concerned income taxes. It took 10 more years for the Court to reject the application of the intergovernmental immunity doctrine to state gross production and excise taxes on oil produced by non-Indian lessees from leased Indian lands, and to overrule a line of pre-1938 decisions to the contrary. See Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342, 367, 69 S.Ct. 561, 574-575, 93 L.Ed. 721 (1949). Even if Congress had considered Mountain Producers in enacting a bill that was silent as to state taxation, it would have been the prudent course for Congress, in view of the continued uncertainty of the law, to have used express language had it wished to perpetuate state tax authority.
^5 The majority correctly notes, ante, at 178-180, that the Department of the Interior, in proposing this legislation, advised Congress of the need to change particular technical rules which had made Indian lands less favorable for mining than federal public lands. But those comments in the Department's transmittal letter to Congress do not support the view put forth by the majority that the sole purpose of the 1 38 Act was to achieve parity in that respect.
^6 The compromise, as implemented, permitted the States to tax the producers of oil and gas, and freed the States to use those proceeds in any manner they chose, with no requirement that the taxes be used to benefit either Indians or reservation activities. See S.Rep. No. 768, 69th Cong., 1st Sess., 6 (1926).
^7 Even if the silence of the 1938 Act simply were held to be ambiguous, our precedents consistently have required that ambiguities in statutes affecting tribal interests be resolved in favor of Indian independence. Ramah Navajo School Board, Inc. v. Bureau of Revenue of New Mexico, 458 U.S. 832, 838, 102 S.Ct. 3394, 3398-3399, 73 L.Ed.2d 1174 (1982); White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143-144, 100 S.Ct. 2578, 2583-2584, 65 L.Ed.2d 665 (1980). That canon of interpretation would require rejecting the conclusion the majority reaches here.
^8 Tribal regulation is expressly contemplated by regulations promulgated under the 1938 Act, which specify that certain statutory and regulatory provisions "may be superseded by the provisions" of tribal law enacted pursuant to the IRA. 25 CFR § 211.29 (1988).
^9 The manner in which a State exercises a regulatory role in the area of well spacing indeed underscores the comprehensiveness of federal law in this area: state law applies not of its own force, but only if its application is approved by the Bureau of Land Management. Furthermore, additional federal spacing requirements apply to Indian lands. See 43 CFR §§ 3162.3-1(a) and (b) (1987).
^10 To the extent that the majority relies on services provided to members of the Tribe or on off-reservation services provided to Cotton Petroleum, see ante, at 185, 189, those expenditures are not relevant under our precedents. We held in Ramah Navajo, that services provided to a contractor off the reservation are "not a legitimate justification" for taxing on-reservation activity, because "[p]resumably, the state tax revenues derived from [the contractor's] off-reservation business activities are adequate to reimburse the State for the services it provides." 458 U.S., at 844, and n. 9, 102 S.Ct., at 3401-3402, and n. 9. In that case, we also considered and rejected off-reservation services to members of the Tribe as a basis for state taxation. We were "unpersuaded by the State's argument that the significant services it provides to the Ramah Navajo Indians justify the imposition of this tax. The State does not suggest that these benefits are in any way related to [the on-reservation activity the State seeks to tax]." Id., at 845, n. 10, 102 S.Ct., at 3402, n. 10.
^11 The distribution of responsibility is even clearly reflected in the relevant oil-and-gas-related expenditures during the 5-year period at issue in this case: federal expenditures were $1,206,800; tribal expenditures were $736,358; the State spent, at most, $89,384. Brief for Jicarilla Apache Tribe as Amicus Curiae 10-11, n. 8. In any event, it is clear from this Court's rejection of the Montana severance tax at issue in Montana v. Crow Tribe, 484 U.S. 997, 108 S.Ct. 685, 98 L.Ed.2d 638 (1988), that the mere fact that the State has made some expenditures that benefit the taxed activities is not sufficient to avoid a finding of pre-emption. See Motion to Affirm for United States in Montana v. Crow Tribe, O.T. 1987, No. 87-343, p. 21 (Montana spent $500,000 to pay 25% of the cost of a road used by employees and suppliers of a mine).
^13 See, e.g., Snipp, American Indians and Natural Resource Development, 45 Am.J.Econ. & Soc. 457, 468 (1986); 1 American Indian Policy Review Commission, Final Report 339, 342, 343-344, 347 (1977) (concluding that state taxes on lessees lower Indian royalties and interfere with Indian taxation); Task Force Seven, Reservation and Resource Development and Protection, Final Report to the American Indian Policy Review Commission 139, 143, 145 (Comm. Print 1976).
^14 Alth ugh this Court ruled in Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980), that the mere fact of Indian taxation does not oust a State's power to tax, this Court clearly relied in Colville on the fact that value generated by the activity there at issue (smokeshops) was not developed on the reservation by activities in which the Tribe had an interest. We observed in Colville that the Tribe was basically importing goods and marketing its tax immunity. Id., at 155, 100 S.Ct., at 2589. That is not so here. Indeed, our decision in Colville expressly left open the possibility that "the Tribes themselves could perhaps pre-empt state taxation through the exercise of properly delegated federal power to do so." Id., at 156, 100 S.Ct., at 2590.