NEW TOWN - The tax director for The Three Affiliated Tribes says the tribes are getting shortchanged by the state in the amount of tax revenue from oil development. 

Tribal tax director Mark Fox, tribal chairman Tex Hall and some members of the tribal business council say the state should amend the state-tribal oil and gas tax agreement so it is equitable. But state officials have refused, they say.

The tribal business council members unanimously passed a resolution at a November meeting that states they have concerns with the agreement, that it is not equitable and needs to be changed.

If the state does not agree to changing the agreement to generate more income for the tribe, Fox said it's possible the tribe will pull out of the agreement to end it.

Jeff Zent, a spokesman for Gov. Jack Dalrymple, said last week: "The governor has met with tribal leaders regarding the tax agreement and we have agreed to look further at how the agreement performs."

"The agreement has been a breakthrough in getting oil and gas development under way on the Fort Berthold Indian Reservation, where there was no development for decades. It is very important that the tribe and state continue to provide leadership in maintaining an agreement that is beneficial to all parties," Zent said.

Fox said people often have the misconception the Three Affiliated Tribes is getting a great deal of tax revenue from oil development and they should use it for road repairs, housing shortage, law enforcement, environmental protection and other needs.

"We would have made $16 million to $20 million more in tax revenue in 2011 if the agreement was changed. If we change that today, we would have an additional $25 million to $30 million more in tax revenue, but we're not going to have it because it remains unequitable," Fox said.

Fox told oil companies and tribal representatives at a recent tribal roads meeting that, in his opinion as a professional who works for the Three Affiliated Tribes, the state-tribal oil and gas tax agreement the tribes made with the state of North Dakota spurred economic activity, and oil and gas development on the Fort Berthold Reservation because of one reason 11.5 percent one solid tax. There wasn't dual taxation and production came in, he said.

"But how we have split that within the agreement has been a catastrophe for our tribe," Fox said. "The agreement provides that the state gets 80 percent of the production and extraction tax on nontrust land within the boundaries of the reservation. But they split the trust land down the middle."

"They have a five-year exemption on extraction tax on nontrust land but they get, day one, 50 percent of the extraction tax on trust lands," Fox said.

Fee land is land that is not held in trust by the U.S. government. Indians and nonIndians can own fee land. Trust land is property held in trust by the U.S. government and can be tribal or individual land.

In 2010, the state and Three Affiliated Tribes signed a continuation of the state-tribal oil and gas tax agreement that continued the production of oil and gas on the Fort Berthold Reservation. The reservation is in the heart of the Bakken, a lucrative oil-producing formation.

The first tax agreement was signed by the state and tribes in June 2008. The agreement sought to change the two-tax system into one that would stimulate business activity for the tribes, according to a news release issued jointly by the state and the tribes in 2010. The present agreement remains in effect indefinitely unless canceled by either party, according to the agreement.

"Within the agreement, the way the money pans out, the state gets nearly twice as much money in revenue. They're doubling it," Fox said.

He said the trend since Jan. 1 of this year is that most of the tax revenue is coming from trust lands but the state is collecting almost twice as much in tax.

"We went in to try to change it this spring with the North Dakota Legislature," Fox said. He said the state would not do it. "They defeated the bill 43 to 2," he said. He said they also asked it to be addressed at the special session of the Legislature to change it, and again they were refused.

"We keep telling them, 'Look, you've got to make this more equitable so that the tribal revenue addresses what's going on here, and the state has refused to do it," Fox said.

"Now, how much does the state spend on tribal and BIA (Bureau of Indian Affairs) roads that you have to drive on, that we have to drive on? That affects your ability to perform your contracts and do your exploration in drilling. How much does that go to it? Zero dollars goes to that," Fox told the group of representatives with oil companies working on the reservation and tribal and BIA representatives.

He said when state Highways 22 and 23 need work the state puts money into those roads.

He also told the group the state gives money to the counties and townships in which the reservation is located, but when the tribes turn to the counties for financial help with tribal or BIA roads the counties say they can't do it because it isn't allowed or doesn't qualify.

"That's where the tribe is at. We've got to figure out a way to get revenue in here," he said.

Fox said the Three Affiliated Tribes have spent nearly $15 million of its own money on roads since mid-2008. Some oil companies have helped with minor road repairs, he said. But in a short time, he said the roads need to be repaired again.

The Three Affiliated Tribes, oil companies working on the reservation and BIA have been trying to find a way to repair damaged roads on the reservation. One of the ways the tribes and the BIA are proposing to the oil companies is to have the oil companies assume more responsibility for road repairs.

The tribes and the BIA have draft cooperative agreements in which the oil companies would help with repair costs and plan to combine them into one agreement. However, for several months, the oil companies, BIA and tribes have been in discussions over the agreements but so far no agreements have been finalized.

Fox said the federal government has not lived up to its obligations to fund road repairs and help the tribes. As an example, he said a federally funded Municipal, Rural & Industrial water project for the tribes to lay pipe to get water to individual homes on the reservation was cut by 95 percent this fiscal year.

"It's probably not going to get any better, so the bottom line is how do we figure it out the tribe, the oil companies, with some assistance by the federal government hopefully? How do we figure out how to get this done?" Fox said.

The plan proposed the day of the recent meeting was to have a small work group made up of engineers from the oil companies along with tribal and BIA representatives meet to come to a consensus of how the road repairs can get done.

Fox said the bottom line is the tribes have an agreement with the state that if it is changed, it will help provide the tribe with resources to deal with the negative impact of oil and gas development on Fort Berthold. "There are a lot of areas of negative impact," he said.

The financial needs of the tribes' goes beyond road repairs, Fox said.

"We don't want to wake up 20 years from now after this oil boom and economic activity and be in a world in which our poverty is worse, our crime is worse and everything is worse," Fox said. "If we sell this oil, life on Fort Berthold Indian and nonIndian should be a lot better as it should be with the state. We're one of the three states that has the positive budget and we're at the top of that. For the state, they know that, they recognize that, they've got the Legacy Fund... They're doing it right. But the problem for our tribe is first and foremost is the agreement."

"If the only end result of our (tribes') valuable oil is to offset the negative impact caused by oil and gas development, then we're better off leaving it in the ground. If we're going to sell this valuable resource, it should be going to change our lifestyle for the better for the people who live here," Fox said.

MAKOTI - The U.S. Environmental Protection Agency has reissued a notice for public comment on portions of a key permit for the Three Affiliated Tribes' refinery. However, a tribal official said plans are moving forward on the refinery and the reissuance of portions of the National Pollutant Discharge Elimination System permit is not expected to slow down the process. 

"Although portions of the August 2011 final permit are being renoticed, EPA officials say they are committed to issuing a final National Pollutant Discharge Elimination System permit to the Mandan Hidatsa and Arikara Nation for their proposed Clean Fuels Refinery," said Glenda Baker Embry, public information officer for the Three Affiliated Tribes.

The tribes are making plans to build and operate a refinery at a site on the Fort Berthold Reservation. The refinery will be built west of Makoti in Ward County at a site near the Enbridge Pipelines and Canadian Pacific Railway tracks. The site is also near N.D. Highway 23.

Tribal chairman Tex Hall told The Minot Daily News in August, when the permit was approved, that when the tribes switched their plan from processing Canadian tar sands to the Bakken crude, it threw in more consultation. "I call it the federal merry-go-round and it seemed like we couldn't get off that merry-go-round," he said.

"The NPDES permit establishes specific conditions and limits on water discharges from the proposed refinery to surface waters. After the August permit was issued and during the review and comment period, the Environmental Appeals Board received a petition alleging that some effluent limits in the permit are inaccurate.

"After review, the EAB determined an error was made in calculating six of the effluent limits in the NPDES permit for one of the discharge points from the refinery and has reissued these effluent limits and provided an opportunity for public review and comment," Embry said. She said the comment period will end Jan. 13, 2012.

Meanwhile, she said work is continuing while the tribes wait for the full reissuance of the permit.

"Although the NPDES permit is required to discharge wastewater, it is not required to initiate construction. Staff is right now reviewing the request for financing and development proposals and looking over financing and development. We believe the criteria that the EPA is renoticing will only strengthen the permit," Embry said.

EPA Region 8 officials in Denver, in a prepared statement, said the Environmental Appeals Board received the petition from the Environmental Awareness Committee. The committee is a Fort Berthold Reservation group comprised of tribal members.

EPA officials said the effluent limits include limits for chemical oxygen demand, biochemical oxygen demand, total suspended solids, total chromium, phenolic compounds, and oil and grease.

"EPA acknowledges this error and has reissued these effluent limits and provided an opportunity for public review and comment," EPA officials said.

The EPA officials said the NPDES permit is required to discharge wastewater to surface waters once the refinery is operational, and it is not required to initiate construction.

The tribes have been working on the refinery project since 2003. The refinery would be one of the few oil refineries to be constructed in the United States in the past 30 years. It would be capable of refining 15,000 barrels of oil per day.