Economic Implications of Historic Oklahoma Ruling

by Nika McKechnie, IEDC Intern

On July 9th, the US Supreme Court ruled to honor an 1832 treaty between the US government and five Native nations: the Cherokee, Chickasaw, Choctaw, Creek and Seminole, sometimes referred to as the Five Civilized Tribes. Under this treaty, nearly half of eastern Oklahoma was designated as tribal territory and promised to tribes who had been forcibly displaced from their ancestral homelands. For many Natives, this decision was a major victory, given the history of the US government violating more than 370 treaties made with tribes.

This landmark decision reaffirms the designation of half the state as reservation land, including the city of Tulsa. As of yet, it is unclear exactly what implications this ruling will have. A joint statement from the Five Tribes and the state of Oklahoma asserted that they are “committed to implementing a framework of shared jurisdiction that will preserve sovereign interests and rights to self-government while affirming jurisdictional understandings, procedures, laws, and regulations that support public safety, our economy, and private property rights.”

Oil Industry

The main impact of the decision will be on criminal court proceedings, as any crime committed on reservations must be prosecuted in tribal or federal court, not state or local. However, some are predicting that the oil industry is also potentially facing a large impact from this decision. 

Oklahoma is currently the fourth-largest oil producer in the US, and now about a quarter of the state’s oil and gas wells and 60 percent of its refineries are within tribal territory, in addition to a network of major pipelines. Experts seem to agree that it is unlikely that oil production will be completely halted, but say that tribes may claim new taxation and regulatory authority in their lands. Oil producers may face new taxes imposed by tribes in addition to state taxes, and tribes may expect to have greater influence on pipeline approvals and renewals.

Land Ownership and Taxation

Questions have also emerged regarding ownership of land and taxation given this new designation of eastern Oklahoma as tribal land. Land ownership is unlikely to change based on federal legislation about reservation allotments, but the future of taxation is less certain.

In the late 1800s, US policies such as the Dawes Act divided Native lands into single-family allotments and distributed them to Native families based on blood quantum limits, imposing private property regulations onto previously communal lands. After the distribution of allotments, the government deemed any land left on reservations that was not held by a Native family as “surplus,” and made it available for purchase by non-Natives. This process is how the US circumvented following treaties promising land to Native tribes, and now ensures that property ownership will not be affected, even with new reservation boundaries, as the land is privately held and fully taxable.

Native people living in areas of Oklahoma newly recognized as reservation land may push back against state income taxes. Previous Supreme Court decisions have ruled that states have no taxing authority within reservations, and so anyone receiving their full income inside of their tribe’s jurisdiction may have a strong argument against paying state income taxes.

Going Forward

Ultimately, the full impact of the Supreme Court ruling will be determined by the agreement eventually reached between the state of Oklahoma and the Five Tribes nations. Governor Kevin Stitt has created a commission composed of business and political leaders to advise him on further decisions, and the federally-recognized tribes in Oklahoma have formed a council to ensure an equal political voice to all tribes in the ongoing negotiations.