Former interior secretary James G. Watt, who once referred to Indian reservations as examples of the "failure of socialism," is trying to inject some capitalism into those same reservations, offering to increase their oil and gas income for a share in the profits.
According to published reports, Watt has joined with another former Interior Department official to persuade tribes to jettison their leases with large oil companies and contract instead with Chuska Oil Co., a Watt client, to extract oil for sale on the open market.
Watt, who now heads the James Watt Co. consulting firm in Washington, declined to comment on his business venture; his business partner, former deputy assistant secretary for Indian affairs Roy Sampsel, could not be reached.
Several news accounts quoted Watt as calling the plan "revolutionary" when he offered it last week to the Arapahoe and Shoshone tribes on the Wind River Indian Reservation in Wyoming. According to a tribal official, Watt told the tribe that Chuska Oil could increase their oil and gas income by $100 million a year in return for 14 percent of the profit.
According to Interior Department officials, however, there is nothing revolutionary to Watt's offer: He apparently is seeking a niche for Chuska under a 1982 law that gives Indian tribes more control over mineral development on their lands.
In the past, tribes leased mineral rights to oil companies in return for bonuses and royalties, much as the federal government does. Under the new law, tribes have the option of entering into joint ventures with oil extractors. The arrangement can have significant financial advantages for both parties, according to Interior officials. As partners in the venture, the Indians generally can strike a deal for a larger share of the profits. But because the income from the oil or gas is handled by the tribes -- which are exempt from taxation on income produced from the reservation -- the companies can escape a variety of windfall and severance taxes.
"The bottom line is that the tribes want a better livelihood for their people," said Gary Collins, tribal geologist for the Arapahoe-Shoshone reservation. "The tribe likes to go about its business in a discreet manner, not to publicize anything until all the details are ironed out. This one kind of got out of the bag."
The new mineral leasing law was passed while Watt was serving at Interior, but department officials said yesterday that the former secretary had no involvement in the legislation. Federal ethics officials said Watt's business relationship with the tribes, which he once oversaw as interior secretary, does not violate the Ethics in Government Act. A separate federal law states that the usual postemployment restrictions do not apply to government officials who go to work for Indian tribes, as long as the official lets his former agency know when he intends to represent the tribe.
"Mr. Watt has done that," said Gabriel Paone of the Interior Department's ethics office.
Watt is negotiating similar economic development packages with six other Indian tribes, according to Interior officials familiar with his activity. He has competition for the Arapahoe-Shoshone account; Amoco and Exxon, among others, are vying for the joint venture, according to tribal officials.