Court airs dispute over coal tax on Indians
Story-Date: 12:09 p.m. PST Tuesday  , February 24, 1998

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Court airs dispute over coal tax on Indians


By Laurie Asseo
Associated Press Writer


WASHINGTON (AP) -- Montana should not have to pay $58 million to the Crow
Indian Tribe for illegally collected taxes on coal mined on the
reservation, the state's lawyer told the Supreme Court Tuesday.

But some justices questioned why the state should be allowed to keep the
revenue when the tax has been ruled illegal.

"Why can't they (the tribe) just get restitution?" asked Justice Stephen G.
Breyer. "Why shouldn't they have it? The state isn't entitled to it."

However, Justice Sandra Day O'Connor suggested the tribe isn't necessarily
entitled to the full amount either.

"Maybe ... (the case) ought to be sent back so we can look at what the
injury to the tribe was," she said.

Montana state solicitor Clay Riggs Smith contended the state should not
have to turn over the tax revenue because the taxes were not paid by the
tribe but by a company doing business with it.

During the early 1970s, Westmoreland Resources had a contract with the
tribe to mine coal on part of the reservation. In 1975 the state began to
tax coal produced in the state, including on Indian land. The coal mined on
the Crow reservation was taxed at about 33 percent.

The tribe challenged the taxes, saying they violated the tribe's right to
self-government. The Supreme Court ruled in 1988 the tax was illegal, and
$23 million in taxes held in a special account since 1983 was given to the
tribe.

At issue in the current case is $58 million in taxes paid to the state and
Big Horn County by Westmoreland between 1975 and 1982. Interest on that
amount has been estimated at about $300 million.

Lawyers for the tribe and the federal government told the justices the
state should not benefit from having imposed an illegal tax.

The tribe might have been able to negotiate a higher royalty rate from
Westmoreland if the state tax had not been imposed, said Justice Department
lawyer Jeffrey A. Lamken.

The tribe had sought to enact its own 25 percent tax in 1976, but the
federal government refused to approve the tax. Years later, the government
acknowledged it erred in denying approval.

"Westmoreland recognized that one way or another it was going to have to
pay," said the tribe's lawyer, Robert S. Pelcyger.

But several justices questioned whether the tribe would have collected as
much from Westmoreland as the $58 million received by the state.

If the tribe would have received a lesser amount from Westmoreland, Justice
David H. Souter asked, should it still be allowed to collect the full $58
million from the state?

Yes, Lamken said, as long as the amount was not "grossly disproportionate."

A decision on the case is expected by July. The case is Montana vs. Crow
Tribe, 96-1829.



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