TF THE SUPREME COURT OF THE STATE OF MONTANA
NORTHERN BORDER PIPELINE COMPANY,
a Partnership,
Plaintiff and Appellant,
-vs-
THE STATE OF MONTANA, DEPARTMENT OF REVENUE,
OF THE STATE OF MONTANA, et al.
Defendants and Respondents.
APPEAL FROM: District Court of the Seventeenth Judicial District,
In and for the County of Valley,
The Honorable T,eonard Lanqen, 7udqe presidina.
COUNSEL OF RECORD:
For Appellant:
Michael E. Webster argued and. Ronald 1,odders;Crowle~7
Law Firm, Billings, Montana
For Respondent :
Hon. Marc Racicot, Attorney General, Helena, Montana
Clay Smith argued, Asst. Atty. General, Helena
David W. Woodgerd, Dept. of Revenue, Helena, Montana
David L. Nielsen, County Attornev, Glasgow, Montana
James A. McCann, County Attorney, Wolf Point, Montana
For Amicus Curiae:
Reid Peyton Chambers; Sonosky, Chambers & Sachse,
Fashington, DC and Ray F. Koby; Swanberg, Koby and
C O
A 3 "Fwanberg, Great Falls, Montana (Assiniboine and Sioux
Y ;!Tribes)
i.1 ,
:
Submitted: February 10, 1989
Decided: April 20, 1989
where a portion of it crosses "trust lands'' (lands held by
the Federal. Government in trust for members of the Indian
tribes) within the Fort Peck Indian Reservation. In order to
build the line on trust Lands, Northern Border was required
to obtain a right-of-way grant from the United States
Department of the Interior through the Bureau of Indian
Affairs. Prior written consent was also required from the
Assiniboine and Sioux Tribes (Tribes) with respect to tribal
trust lands, and from individual tribal members with respect
to lands held in trust for them.
The portion of the pipeline running through reservation
trust lands is located in Valley County (12.92 miles), and in
Roosevelt County (20.88 miles) . From the time of its
construction, the pipeline has been subject to a property tax
centrally assessed by the State. The assessed tax is levied
and collected by the Counties. Northern Border has paid this
tax without protest, except for a disagreement in 1986 as to
the proper valuation of the line.
In 1987, the Tribes instituted a "utility tax," which is
basically a property tax levied on utilities. The amount of
the tribal tax related to the pipeline running beneath trust
lands was $1,112,396.56 in 1987. The 1987 property tax
assessed by the State resulted in Valley County collecting a
total of $2,305,346.05 ($370,794.56 of which related to trust
lands), and Roosevelt County collecting $2,??1,875.37
(5535,243.85 of which related to trust lands).
Northern Border filed its Application for Temporarl7
Restraining Order and Complaint for Injunctive Relief on
November 23, 1987, requesting that the District Court prevent-
the State from assessing, levying or collecting propertv
taxes on the portion of the line running beneath trust lands.
The amount of Northern Rorder's 1987 property tax therebv
challenqed was $906,038.41. The District Court. issued a
Mr. Justice R. C. McDonough delivered the Opinion of the
Court.
This appeal involves a dispute over property taxes
assessed and levied against a natural gas pipeline owned by
Northern Border Pipeline Company (Northern Border). Northern
Border appeals from the summary judgment of the District
Court of the Seventeenth Judicial District, Valley County,
upholding the power of the State of Montana to impose the
disputed tax. We affirm.
Northern Border frames six issues on appeal:
1. Does the factual record before the District Court
show that Northern Border was entitled to summary judgment?
2. Did the District Court err in failing to find that
the challenged taxes have been preempted by federal law?
3. Did the District Court commit error in failing to
find that the challenged taxes are illegal because thev
interfere to an impermissible extent with the Tribes'
sovereign rights of self-government?
4. Did the District Court err in determining that the
State has a sufficient nexus with the trust-sited property
interests of Northern Border to support imposition of the
taxes here challenged?
5. Do the challenged taxes constitute an unreasonable
burden on interstate commerce?
6. Do the acts of the State in attempting to assess,
levy and collect the challenged taxes conflict with the
Enabling Act of the State of Montana and the Constitution of
the State?
The pipeline in question carries natural gas from Alaska
to the lower 48 states. Northern Border owns the line
between the Sasketchewan/Montana border and Chicago.
Approximately 181 miles of the line is located in Montana,
temporary restraining order enjoining collection of the
challenged tax, and later granted a preliminary injunction.
The parties then filed cross-motions for summary judgment
with supporting affidavits. The District Court granted the
State's motion and denied Northern Border's.
At the outset, we note two important features of this
case that have shaped our approach to reviewing the District
Court's decision. First, the basis for this suit is a state
tax levied against property located on an Indian reservation,
but owned by non-Indians. The arguments involved are complex
and sometimes confusing, due to the legal principles involved
and the attempts of counsel to emphasize particular aspects
of those principles.
Second, this case was decided below on a motion for
summary judgment. The judge sat without a jury, no testimony
was taken and the facts are relatively uncontested. The
scope of our review is therefore much broader than in other
appeals. We are able to make our own examination of the
entire case and make a determination in accordance with our
findings. Johnson v. Division of Motor Vehicles (Mont.
1985), 711 P.2d 815, 42 St.Rep. 2045.
Given the complexity of the arguments and the resulting
risk of confusion, we have taken an approach to this case
that differs from that proposed by Northern Border. Northern
Border's challenge to the taxes imposed by the State rests on
three basic grounds: (1) preemption by federal law, ( 2 )
violation of the United States Constitution and (3) violation
of the Montana Constitution. While the issues framed by
Northern Border have relevance, they are component questions
of these three main issues.
I. Federal Preemption
Northern Border arques that the pipeline running through
reservation trust lands is subiect to federal laws and
regulations, with which the challenged state property tax
will interfere to an impermissible extent. Both sides agree
that the test to be applied in this case was set forth bv the
United States Supreme Court in White Mountain Apache Tribe v.
Bracker (1980), 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665.
The White Mountain opinion outlines the relationship amonq
the Indian tribes, the Federal Government and the several.
states.
Indian reservations are a creation of federal law.
Indian activities and property on a reservation generallv
come within the sphere of federal authority, except in
matters where an Indian tribe has retained its tribal
sovereignty and is self-governing. A state's laws are
therefore generallv inapplicable where the conduct of Indians
on the reservation is concerned. White Mountain, 448 U.S. at
143-44. Where a state seeks to have its laws apply to the
activities or property of non-Indians on a reservation, the
separation of authority is less clear.
In White Mountain, the State of Arizona sought to impose
fuel use and motor carrier license taxes on trucks owned and
operated by a non-Indian company, but used in furtherance of
a contract with a tribal enterprise engaged in logging
operations on a reservation. The company and the tribe
challenged the portion of Arizona's tax that applied to
logging and hauling activities carried out exclusively on the
reservation, using tribal and federal roads.
The Supreme Court set out essentially a two-pronged test
for preemption, because it found that two "independent but
related barriers" could preclude a state from asserting its
authority on a reservation. First, the exercise of state
authority could be preempted by directly applicable federal
statutes or regulations. Second, the state could unlawfully
infringe on the riqht of Indians to make their own laws and
be governed by them. White Mountain, 448 U.S. at 142 (citing
Warren Trading Post Co. v. Arizona Tax Cornm'n (1965), 380
U.S. 685, 85 S.Ct 1242, 14 L.Ed.2d 165; and Williams v. Lee
(1959), 358 U.S. 217, 79 S.Ct. 269, 3 L.~d.?d 251,
respectively).
The Supreme Court noted that these two barriers are
independent, because either standing alone could he a
sufficient basis for finding a state law inapplicable. Thev
are also related, because the right of tribal self-government
is ultimately subject to the power of Conqress, and thus is
effectively a creature of federal law iust as are statutes
and regulations. We will therefore treat these two separate
questions as elements of the same federal preemption
analysis. Because the interaction of the various
governmental interests in each case will vary, the White
Mountain test calls for a "particularized inquir:~ into the
nature of the state, federal and tribal interests at stake,"
which are then balanced to determine whether the state law is
preempted. White Mountain, 448 U.S. at 145.
A. Federal Statutes and Regulations
Northern Border asserts that the challenged state tax in
this case is preempted by two directly applicable bodies of
federal law. The first of these is comprised of statutes
enunciating the Federal Government's goal of promoting tribal
self-sufficiency and economic development, specifically, the
Indian Financing Act of 1974, 25 U.S.C. § § 1451 et seq.; the
Indian Self-Determination and Education Assistance Act of
1975, 25 U.S.C. §§ 450 et seq.; and the Indian Reorganization
Act of 1934, 25 U.S.C. §§ 461 et seq. For example:
The Congress hereby recognizes the obligation of
the United States to respond to the strong
expression of the Indian people for
self-determination ...through the establishment of
a meaningful Indian self-determination policy which
will permit an orderly transition from Federal
domination of programs for and services to Indians
to effective and meaningful participation by the
Indian people in the planning, conduct, and
administration of those programs and services.
25 U.S.C. § 450a.
It is hereby declared to be the policy of Congress
to provide capital on a reimbursable basis to help
develop and utilize Indian resources, both physical
and human, to a point where the Indians will fully
exercise responsibility for the utilization and
management of their own resources and where they
will- enjoy a standard of living from their own
productive efforts comparable to that enioyed by
non-Indians in neighboring communities.
25 U.S.C. 5 1451.
The second body of law is the scheme of regulations governing
the granting of rights-of-way over Indian lands found at 25
C.F.R. S§ 169.1, et seq. The purpose of these regulations is
stated in 25 C.F.R. § 169.2 as prescribing the "procedures,
terms and conditions" under which rights-of-way can be
granted across tribal land.
Two of the seminal cases in this area, relied upon by
both parties in this case, are White Mountain and Washington
v. Confederated Tribes of the Colvil!.e Reservation (19801,
447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10. The result in
each case was different, which allows for an examination of
the interests that will cause the balance to tip one way or
the other. An overview of these cases shows that the
federal/tribal interest will be strongest, and the state
interest correspondingly weakest, where the activitv or
property at issue involves only Indians and is located solely
within the reservation. The reverse is true when the
activity or property involves non-Tndians and has effects
that are felt off the reservation. See White Mountain, 448
U.S. at 144; Colville, 447 U.S. at 154-57.
In White Mountain, the logging operation at issue was
conducted exclusively on reservation lands, using roads built
or maintained by the White Mountain Tribe and the Federal
Government. The Supreme Court noted the general policy goals
contained in the statutes cited above, and examined the
extensive federal laws and regulations directly applicable to
the logging operation. The regulations dictated, among other
things, the amount of timber that could be sold, methods of
cutting trees, advertising, mode of bidding, roads to be
used, hauling equipment to be used, speed at which equipment
could travel, and dimensions of the loads to be hauled.
The Supreme Court found Arizona ' s justification for its
taxes insufficient to counterbalance their interference with
the applicable federal regulatory scheme. Arizona did not
assert a public regulatory purpose; i.e., the challenged
taxes were not used to address off-reservation effects of the
logging operation. The revenue raised by the taxes was used
for "partially compensating the state for the use of its
highwavs. " White Mountain, 448 U.S. at 139-40. Arizona's
interest in imposing the taxes was held to be slight due to
the lack of a public regulatory purpose and the fact that
Arizona was not providing any on-reservation services with
the revenue from the challenqed taxes. The logginq trucks
involved did not use state roads or highways.
By contrast, the Arizona taxes added a cost component to
the logging operation that interfered with three facets of
the federal statutory and regulatory scheme: (1) the
"overriding federal ob-jective of guaranteeing Indians that
they will 'receive ... the benefit of whatever profit [the
forest] is capable of vielding; 'I ' (2) the Federal-
Government's ability to set fees and rates required to carry
out logging operations and timber sales; and (3) the tribe's
ability to sustain the costs involved in following the
federally-mandated sustained yield policy. The Supreme Court
found that "no room remains for state laws imposing
additional burdens" on the l.ogging operation. White
Mountain, 448 U.S. at 149-52.
In Colville, the tribes involved enacted ordinances
authorizing the taxation of on-reservation cigarette sales.
The tribes refused to collect Washington cigarette or sales
taxes on the transactions. This made the price of cigarettes
purchased on the reservation lower than those purchased
elsewhere, and non-Indian people traveled to the reservation
for the specific purpose of buying cigarettes.
The Supreme Court found this case to be in contrast to a
situation (such as that in White Mountain) where the
challenged tax affected value generated on the reservation by
activities in which the tribes had a strong interest. "What
the smokeshops offer these customers ...
is solely an
exemption from state taxation." Colville, 447 U.S. at 155
(contrasting Moe v. Salish and Kootenai Tribes (1976), 425
U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96; and McClanahan v.
Arizona State Tax Comrn'n (1973), 411 U.S. 164, 93 S.Ct. 1257,
36 L.Ed.2d 129).
The Colville tribes had argued that Washington's taxes
were preempted by the policy of Indian self-sufficiency set
out in the statutes quoted above. The Supreme Court held
that the general policy of self-sufficiency was insufficient
to outweigh Washington's interest in raising revenue through
its sales and cigarette taxes. The statutes were held to be
evidence of "congressional concern with fostering tribal
self-government and economic development, but none [went] so
far as to grant tribal enterprises selling goods to
nonmembers an artificial competitive advantage over all other
businesses in the State." Col-ville, 447 U.S. at 155.
In the present case, both parties have examined
precedent such as White Mountain and ColvilZe closely in
seeking to add weight to their respective interests. For
example, in its briefs to the District Court and to this
Court, Northern Border quotes an opinion of the Tenth Circuit
Court of Appeals for the proposition that a state's interest
in assessing a tax is "particularly minimal when it seeks to
raise revenue by taking advantage of activities that are
wholly created and consumed within tribal lands and over
which it has no control." Indian Country U.S.A., Inc. v.
State ex rel. Oklahoma Tax Comm'n (10th Cir. 1988), 829 F.2d
967, 987. Northern Border then argues that because the
portion of the pipeline in question is on trust lands "over
which the State has no jurisdiction," Montana's interest in
raising revenue is likewise particularly minimal. This
argument ignores the fact that Northern Border's
pipeline--part of a system stretching from Alaska to
Illinois--can hardly be characterized as "wholly created and
consumed within tribal lands." It also presupposes the
result of the White Mountain test, which will determine
whether the State has a sufficient interest to assert
jurisdiction to tax Northern Rorder's trust land-sited
pipeline.
The State has also engaged in overstatement. For
example, the State seeks to derive a rule from holdings such
as Colville and White Mountain that direct interference with
a particular federal regulatory scheme is necessary before
preemption can be found. However, the Supreme.Court in White
Mountain stated that the balancing of federal, tribal and
state interests was to include consideration of the broad
policies that underlie relevant federal laws. White
Mountain, 448 U.S. at 144-45. While Colville held broad
federal policy insufficient to preempt the state law at
issue, it was nonetheless considered as the main component of
the tribes' argument. Colville, 447 U.S. at 155. A specific
federal regulatory scheme would yield a federal/tribal
interest that weighed more heavily in the White Mountain
test, but it is not a prerequisite for federal preemption.
Unlike the decisions in White Mountain and Colville, the
balance of federal, tribal and state statutory and regulatory
interests in this case has a narrow focus. This is not a
case where an extensive set of directly applicable federal
statutes or regulations leaves no room for the exercise of
state authority challenged here. Nor is it a case where the
Tribes are attempting to gain a commercial advantage by
marketing an exemption from state taxation.
As to the federal/tribal interests, one basis for
Northern Border's argument merits much more weight than the
other. The weaker basis is the scheme of federal regulations
concerning right-of-way grants across reservation lands. The
State and the District Court agree that this regulatory
system is fairly extensive, but Northern Border makes only
bald statements that the State's tax is preempted by the
regulations, without showing any actual relationship between
the two.
The activity being regulated is the granting of
rights-of-way. The State does not seek to tax the
right-of-way itself or any facet of the granting process.
The State's tax is on the pipeline; the property of Northern
Border that was not put in place until after the right-of-way
grant was obtained. While it is conceivable that some
decision made regarding a future right-of-way grant might be
somehow affected by the tax, Northern Border has advanced no
argument as to what that effect might be. The regulations
are at best tangentially related to a property tax on a
pipeline sitting in an existing right-of-way. The
federal/tribal interests represented by the right-of-way
regulations are slight, and can be accorded little weight.
Northern Border's stronger argument is based on the
federal policy of encouraging tribal self-sufficiency set out
in the statutes quoted above. In its initial brief to the
District Court, Northern Border argued that the Tribes'
utility tax ordinance, by providing revenue for the Tribes to
use in providing services on the reservation, was effectively
furthering this federal policy. Northern Border argues that
the State's tax makes it more expensive for utilities to
locate property on trust lands than it is elsewhere.
According to Northern Border, this gives the State the power
to control a major factor in any decision to locate business
property on the reservation. This would interfere with the
federal self-sufficiency policy by inhibiting the Tribes'
ability to manage their own resources (see New Mexico v.
Mescalero Apache Tribe (1983), 462 U.S. 324, 103 S.Ct. 2378,
76 L.Ed.2d 611), and by reducing the revenue available for
providing reservation services. However, as the State is
quick to point out, no present injury to tribal revenues
resulting from the State's tax has been shown.
Northern Border presents factual support for its
position in the form of affidavits from utility company
executives who state that the double tax burden present on
trust lands would affect any decision by their companies
regarding location of facilities there. The State attacks
these affidavits as speculative and irrelevant. While there
is some merit to the State's attack, the prospective nature
of Northern Border's argument does not render it
inconsequential. The law recognizes that one need not wait
for a threatened iniury to manifest itself before seeking
injunctive or declaratory relief. Crow Tribe v. State of
Montana (9th Cir. 1987), 819 F.2d 895, 903.
The State's interest in assessing the challenged tax is
similar to the Tribes'. The State argues that substantiallv
all of the revenues derived from the tax stay in Roosevelt
and Valley Counties, with a full 71% being used to fund
school districts servicing tribal members living on the
reservation. The State also notes that the Counties maintain
some of the roads on the reservation, and that the State has
law enforcement responsibilities for some crimes committed by
non-Indians on the reservation, including acts of vandalism
against Northern Border's property.,
The balance of the competing interests here as they
apply to preemption by federal laws thus narrows to the
question of providing services. Although both sides have
advanced viable interests to be weighed in the White Mountain
test, the State's interest in funding the school districts
involved here and providing local services outweighs the
federal/tribal interests asserted by Northern Border. The
possible future injury posed by Northern Border has less
impact than what would occur were we to hold the State's tax
to be preempted. For example, any failure by the State to
provide educational opportunity for reservation children
would violate both federal and state law. See, e. g. , Equal
Educational Opportunities Act of 1974, 20 U.S.C. 55 1701, et
seq.; Sec. 1, Art. X I Mont.Const.; 5 5 20-5-103 and 20-5-108,
MCA. The deciding factor is thus the greater present
interest the State has in providing services to reservation
residents. We therefore hold that the challenged tax is not
preempted by federal statutes or regulations.
B. Tribal Self-Government
Northern Border also argues that the State's tax
interferes to an impermissible extent with the Tribes'
sovereign rights of self-government. According to Northern
Border, the interference with prospective tribal tax revenues
wrought bv the State's tax requires a finding of preemption
under the second prong of the White Mountain test, because
taxation is chief among the powers of sovereignty exercised
by an Indian tribe.
The District Court's order noted that the Tribes, and
not Northern Border, are the more appropriate parties to
determine whether their interests will be harmed in the
future by the challenged tax. On appeal, the State amplifies
this point, and argues that Northern Border lacks standing to
raise a self-government claim. The State points to Olson v.
Department of Revenue (Mont. 1986), 726 P.2d 1162, 1166, 43
St.Rep. 1916, 1920, where this Court adopted federal
principles of standing for suits of all kinds, especially
court challenges based on alleged constitutional or statutory
violation. In Olson, we recognized two bases on which
standing rests. One of these is "judicial self-restraint
imposed for reasons of policy." Olson, 726 P.2d at 1166.
The policy at issue here is the general reluctance of courts
to determine the rights of persons who are not parties to the
suit: "... the avoidance of the adiudication of rights which
those not before the Court may not wish to assert, and the
assurance that the most effective advocate of the rights at
issue is present to champion them." Duke Power Co. v.
Carolina Environmental Studv Group., Inc. (1978), 438 U.S.
59, 80, 98 S.Ct. 2620, 2634, 57 L.Ed.2d 595, 616.
Northern Border argues that it has standing to bring the
claims advanced in this suit by virtue of its taxpayer status
and the direct economic injurv it suffers from the double
taxation. Northern Border further argues that this Court has
previously addressed self-government issues in cases where no
Indian tribes were parties (citing Burlington Northern
Railroad v. Department of Public Services Regulation (Mont.
1986), 720 P.2d 267, 43 St.Rep. 1005; and ~ i l b a n k ~ u t u a l
Insurance Co. v. Eagleman (Mont. 19851, 705 P.2d 1117, 42
St.Rep. 1393). Our reading of these cases shows Northern
Border's argument to be incorrect. Our decision in
Burlington Northern was based on applicable federal
regulations, and did not address self-government. The
plaintiff in Eagleman, while technically not an "Indian
tribe," was an individual who was "an enrolled member of the
Fort Peck Sioux and Assiniboine Tribes." Eagleman, 705 P.2d
at 1118. Northern Border also cites two recent state court
decisions, one from Arizona and one from New Mexico, for the
proposition that consideration of a federal preemption claim
necessarily includes consideration of self-government,
thereby affording standing for a non-Indian to assert a
self-government claim. We disagree with these holdings, and
decline to apply them.
Northern Border has standing by virtue of its taxpayer
status to challenge the property tax imposed on it by the
State. However, it does not have standing to assert the
Tribes' sovereign right of self-government in doing so. As
we noted in Olson, the principle of standing requires that
the plaintiff allege "'such a personal stake in the outcome
of the controversy as to assure that concrete adverseness
which sharpens the presentation of issues ....
' " Olson, 726
P.2d at 1166 (quoting Raker v. Carr (1962), 369 U.S. 186,
204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663, 678). Northern Border
cannot allege a sufficient "personal" stake in the
self-government interests of the Tribes to gain standing on
this claim. Having so found, we will not address the claim's
merits.
11. Violation of United States Constitution
Northern Border asserted in its Application for
Temporary Restraining Order and Complaint for Injunctive
Relief that the challenged tax violates three provisions of
the United States Constitution: the Due Process and Equal
Protection Clauses of the Fourteenth Amendment, and the
Indian Commerce Clause. Bevond these initial all-egations,we
find nothing in the various briefs submitted by Northern
Border that purports to be an equal protection argument.
Because our review of the facts shows no objectionable
cl-assification on which to base such a claim, we will not
address it further.
The Due Process Clause claim appears to be based on the
alleged lack of nexus between the State and that portion of
the pipeline crossing trust lands. The State characterizes
this argument as specious, owing to the fact that the trust
lands are located within the boundaries of Montana. Without
passing on whether Northern Border has advanced a specious
argument, we decline to hold that the challenged tax violates
constitutional due process guarantees.
A leading U.S. Supreme Court decision on state taxation,
Container Corp. v. Franchise Tax Board (1983), 463 U.S. 159,
165-66, 103 S.Ct. 2933, 2940, 77 L.Ed.2d 545, 553-54, defines
nexus as a "minimum connection" between the State's income
from the tax and the instate value of the enterprise being
taxed. The tax here at issue is assessed based on the value
of the pipeline found within the State. The revenue obtained
is used to provide government services to Northern Border and
tribal members, among others. This is sufficient nexus to
withstand the due process challenge advanced by Northern
Border.
Northern Border next argues that the State's tax is
violative of the Indian Commerce Clause under the four-part
test established in Complete Auto Transit, Inc. v. Brady
(1977), 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326. First,
the test in Complete Auto applies to the Interstate Commerce
Clause (Art. I, Sec. 8, c1.2, U.S.Const.), not the ~ n d i a n
Commerce Clause (Art. I, Sec. 8, cl. 3, U.S.Const.). Second,
as the Supreme Court stated in Colville, "It can no longer be
seriously argued that the Indian Commerce Clause, of its own
force, automatically bars all state taxation of matters
significantly touching the political and economic interests
of the Tribes." It would, however, have a role in
"preventing undue discrimination against, or burdens on,
Indian commerce." Colville, 447 U.S. at 157. Northern
Border's allegations of future injury to tribal revenues do
not rise to the level of undue discrimination or burden on
Indian commerce. Moreover, the Colville court found
Washington's tax acceptable under this analysis because it
was imposed without discrimination on all transactions within
the state. The tax at issue here is alleged by Northern
Border to be improper for that very reason. It is assessed
against the pipeline based on its value without regard to
where the line is located. within the State. We find no
Indian Commerce Clause violation present in this case.
111. Violation of the Montana Constitution
Northern Border's claim under the Montana Constitution
is confined to the incorporation of Montana's Enabling Act in
Article I:
All provisions of the enabling act of Congress
(approved February 22, 1889, 25 Stat. 676), as
amended and of Ordinance No. 1, appended to the
Constitution of the state of Montana and approved
February 22, 1889, including the agreement and
declaration that all lands owned or held by any
Indian or Indian tribes shall remain under the
absolute jurisdiction and control of the congress
of the United States, continue in full force and
effect until revoked by the consent of the United
States and the people of Montana.
The delegates to the 1972 Constitutional Convention stated
their intent during debate that this provision should be
included to show that the Enabling Act, the "contract"
between Montana and the Federal Government, was still in
force under the 1972 Constitution. VII Mont. Leg. Council,
Montana Constitutional Convention, 1971-1972, 2567 (1981).
The U.S. Supreme Court has held that through enabling
acts, the states surrendered their proprietary interests in
tribal lands, but not necessarily their governmental or
regulatory authority. See Colville, 447 U.S. at 156; Draper
v. United States (1896), 164 U.S. 240. As we held above, the
White Mountain test establishes Montana's jurisdiction to
assess the tax here challenged. That jurisdiction is not
defeated by Art. I, Mont.Const.
After reviewing the record and the briefs to this Court,
we find that Northern Border has not asserted federal/tribal
interests sufficient to outweigh the State's interest in
raising revenue for required government services encompassing
reservation residents, and lacks standing to assert the
Tribes' interests in self-government. We conclude that the
challenged tax is not preempted by federal law. We also have
been unable to find constitutional barriers to the challenged
tax, and conclude that it is therefore constitutional. Given
these conclusions, we hold that there is no issue as to any
fact material to the State's entitlement to summary judgment.
We affirm the decision of the District Court.
We Concur:
Justices
Mr. Justice Fred J. Weber specially concurs as follows:
I commend the majority for a well analyzed and well.
written opinion. Based on previous case law, the majority
has properly struck a balance. Unfortunately, we have been
unable to address the fundamental issue of fairness in the
present case.
Here we have double taxation. After the completion of
the pipeline, the State levied its property tax of approxi-
mately $33,000 for each mile of pipeline on the reservation.
Essentially the State levied the same tax as would have been
levied if the pipeline were located off the reservation in
the State of Montana. Northern Border did not protest such a
tax as it apparently concluded that a single tax of that
nature was appropriate. After several years, the Tribes
became aware of an opportunity to levy a similar property tax
for their own direct use and benefit. Such a Tribal tax was
appropriate because the pipeline was located on the reserva-
tion land. The Tribes then imposed their own property tax of
approximately $33,000 per mile for each mile of pipeline on
the reservation, resulting in an additional annual tax to
Northern Border of approximately $1 million each year. Had
Northern Border constructed its pipeline south of the reser-
vation, there would only have been a single tax. Now North-
ern Border is trapped with a double tax resulting from the
taxing ingenuity of two independent taxing entities. North-
ern Border properly feels it should have a judicial forum
where this unfairness can be reviewed.
Unfortunately our state judicial system is unable to
address that issue of fairness. Our jurisdiction does not
extend to any control over the Tribal lands nor of the
Tribe's annual tax of approximately $1 million. We therefore
cannot consider the tax of both the State and t.he Tribes. We
can only state that the Montana tax is appropriate. Where
does that leave Northern Border?
As a result of this opinion, Northern Border cannot
obtain consideration of the issue in our State judicial
system. Can Northern Border next go to the federal court
system? Clearly the answer again is, "No." If Northern
Border proceeds in federal court, that court system would
undoubtedly agree that kt has the authority to consider the
tax h 7 the Tribes only, hut that it cannot consider the tax
1
imposed by the State of Montana. The result again would he
that the double tax could not be considered. Clearly this i-s
unfair to the taxpayer.
Northern Border argues that the double tax will adverse-
ly effect the economic de~~elopment the reservation. The
of
State argues that the issue cannot be presented by Northern
Border as a taxpayer because this is a matter which can be
presented only by the Tribes who are not parties to the
action. It appears that the majority is correct in not
addressing the issue as to the adverse effect on the economic
development of the reservation. Again there is an element of
unfairness.
Without question there will be an impact on the reserva-
tions of Montana in the future. Economic development on the
Indian reservations will he reduced. Non-Indians, whether
corporate or individ-ual,will - construct taxable property
not
on an Indian reservation if it is possible to place that
property outside a reservation boundary. The message to the
business community is to avoid transactions on the reserva-
tions which may be subject to such a double tax. Tragicallv
the result will be a greater separation of the Tndian reser-
vations from the remainder of the State of Montana.
Montana lacks the power to address all aspects of this
d i lemma. It becomes one more unfortunate aspect of the
Indian problem which remains to be addressed by the Congress
of the United States.
I concur in the majority opinion. Yet I also conclude
that iustice has been denied.