The Energy Wealth of Indian Nations

Introduction

Economists have long sought to explain why some nations are rich while others are poor. Although the recipe for growth remains a matter of debate, most agree that secure property rights and a stable rule of law are necessary ingredients for economic growth. Property rights provide incentives to generate wealth, encourage resource stewardship, and form the basis for market exchanges. A stable rule of law promotes long-term investment by reducing the cost of engaging in market exchange and encouraging capital accumulation.

The importance of the institutions of property rights and the rule of law is evident in American Indian reservations. Crossing into reservations, especially in the western United States, reveals islands of poverty in a sea of wealth. Per capita income for American Indians living on reservations is about half that of other United States citizens. Thirty-nine percent of Indians live in poverty, compared with nine percent of white Americans, and Indian unemployment is almost four times higher than the United States average.

This Article discusses the effects of the institutions and regulations that restrict energy development on tribal lands. It posits that economic development could be realized in Indian Country if tribes and individual Indians had more secure property rights and greater ability to control their own natural resources. The Article then proceeds by providing a background of reservation land tenure and the institutions governing tribal energy development. Next, the Article describes existing energy development on Indian reservations and examines the untapped energy potential on Indian lands. The discussion section of this Article suggests that the institutions governing Indian lands, along with the additional regulations that apply to tribal energy development, act to suppress energy-related economic growth on Indian lands by limiting opportunities for tribes to capitalize on their energy resources. This Article concludes by suggesting that in order to develop their natural resources, tribes living on Indian reservations must be granted the same rights and institutions as those living elsewhere.

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