The Southern Utes also overcame internal obstacles to good governance and economic development. When tribes set up governments under the Indian Reorganization Act -- a sort of New Deal for Native Americans instituted in the 1930s -- they modeled them after federal, state and local governments. But while every other government can simply tax its citizens to fund its own operation, tribal governments have virtually no tax base to draw from -- there's generally little or no income, property or sales to tax. The system fosters a kind of desperation: Tribes are forced to rely on federal funding and are sometimes tempted by apparently self-destructive money-raising schemes -- opening up their lands to high-level nuclear waste, for example.
When Burch's moratorium stanched new royalty revenue in 1974, he took a huge risk. Not only did he put his government in financial danger, but he also effectively reduced the per capita payments to tribal members, many of whom relied on the meager sums -- not much more than $1,000 per year -- for their entire income. Burch -- who led the tribe for three decades with Maynes at his side -- made a similarly risky move in 1992. As part of the Colorado Ute Indian Water Rights Settlement Agreement, the tribe received $8 million from the feds. Rather than leverage it for short-term gain, the tribe formed its own gas production company, the first iteration of Red Willow. If outsiders could get rich drilling the tribe's land, Ute leaders and advisers figured, why couldn't the tribe itself? As obvious as the idea may sound, it was revolutionary at the time.
Thus, while federal policy shuffled toward granting tribes more political sovereignty, the Southern Utes took giant leaps toward what's known as practical sovereignty. They took "advantage of the federal self-determination policy … promised by law but denied by federal paternalism and control," report Stephen Cornell and Joseph Kalt at the Harvard Project on American Indian Economic Development. That's important, they say, because it creates a different, more sustainable model for economic development, one that provides stronger stewardship. "In general," write Cornell and Kalt, "Indian nations are better decision-makers about their own affairs, resources and futures because they have the largest stake in the outcomes."
When Red Willow took over 54 gas wells in 1995, it quadrupled their production within nine months. And the economics changed radically. If an outside company operates a gas well on a reservation, the state and county can impose property and severance taxes on it, and the feds can tax the company's income. This not only cuts into a company's profits, it also leaves less for the tribes to tax. But when the tribe takes over a well, it's exempted from many of the outside taxes, cutting overhead by as much as 30 to 40 percent. "That gave the tribe a huge competitive margin," says Lester. "Plus, they hired experienced hands to run the company. They really did a good job of recruiting and hiring quality, honest, really good employees so that the core team really could produce what the tribe wanted done."
Tom Shipps, one of the key hires, joined Maynes' law firm in 1979, fresh out of law school, and became a national expert on Indian energy law. He served on advisory committees to the Minerals Management Service and handled a grueling lawsuit in the 1990s, taking on Amoco (now part of BP) over coalbed methane contained in a massive coal deposit owned by the tribe. Shipps argued that the coalbed methane was part of the coal -- the way chips are part of a chocolate chip cookie -- and that the tribe was entitled to $1 billion in back payments from Amoco. Amoco and the other companies involved said the owners of the oil and gas rights owned the methane. The U.S. Supreme Court eventually ruled against the tribe. But the companies got cold feet before that happened, and they agreed to settle. The Southern Utes got a 32 percent stake -- with an estimated value of a half-billion dollars or more -- in the coalbed methane deposits.
Bob Zahradnik, a one-time petroleum reservoir geologist who had worked with Exxon, drew up Red Willow's business plan and continues to head the tribe's energy operations. John Jurrius, who has a background on the financial side of the oil industry, brought capital from a huge private equity firm, with which the tribe was able to buy more energy production and distribution companies.
All this helped Burch realize his dream of an economically self-reliant society. Yet it was lopsided: The Southern Utes were almost entirely dependent on revenues from reservation oil and gas. So, in order to diversify, the tribe opened the Sky Ute Casino in 1993 and tasked Jurrius with creating what would become known as "The Plan."
One of the major handicaps to any tribe's economic development, says Jurrius, is the fact that the typical tribal corporation is managed by a government that has frequent elections and resulting turnover. That creates instability in the corporations and is anathema to outside capitalists interested in partnering with or investing in a tribe. Jurrius set out to build a financial structure that provided corporate-style continuity, even as tribal councils came and went. The council retains ultimate decision-making power, but micro-management is kept to a minimum. "It was a very sophisticated plan," says Jurrius, with a thick Texas accent, "(and) it became a road map from which they could make great decisions."
The plan divides the finances into two branches: The Permanent Fund and the Growth Fund. The Permanent Fund invests energy royalties and casino profits in securities, which generate a steady revenue to pay for government and social services. Other revenue goes into the Growth Fund, which in turn invests in what is now a myriad of companies in energy, real estate and private equity. That fund then distributes dividends to tribal members between the ages of 26 and 59 and retirement benefits to those over 60. The numbers vary year by year and the tribe won't reveal them, but one Southern Ute in his 70s says his share last year totaled $77,500.
"They've converted a non-renewable resource into a renewable financial resource because of the way they are investing and because of their strategy," says Lester. "If they stick with their principles, those funds will grow more rapidly than their population and inflation, keeping them on a steady rock of financial security."