Investigation, part 2: AN UGLY HISTORY

by Scott Patterson
SmartMoney.com

An investigation by SmartMoney.com has found that officials in the Bush administration had detailed knowledge of fraudulent practices that allowed energy companies to cheat Native American Indians out of tens of millions of dollars over dozens of years. These officials were aware that employees of the federal government were helping oil and gas companies underpay to operate on Indian lands in the state of New Mexico -- and did nothing to stop it. This is the second article of a two-part series.

INTERSTATE ROUTE 550 CUTS through the heart of northwest New Mexico, a sparse, rugged region dominated by huge mesas and a wide sky. There are no Wal-Marts (WMT), Home Depots (HD) or Rite-Aids (RAD) here. There are no major hospitals, either.

Pipelines, oil drills and gas flares abound, however. The region, known as the Checkerboard, is located square atop the San Juan Basin, which supplies all of the natural gas used by Southern California.

Passing through, one might think this land is deserted. But just a few miles off the highway, down a dusty, unpaved road, a scattering of ramshackle houses and motor homes appears on the horizon. The inhabitants are Navajo Indians who live outside the official Navajo Nation reservation to the west. Referred to as "allottees," they own individual parcels of land created by the General Allotment Act of 1887. Navajo allottees are among the poorest ethnic groups in the U.S. According to a 2001 report by the Navajo Nation Division of Economic Development, 56.1% of Navajo people live below the poverty level, with per-capita income of $6,217 and an unemployment rate of 43.65%.

Major energy companies such as Apache (APA), Burlington Resources (BR) and ChevronTexaco (CVX) do business on the Checkerboard, extracting natural gas, coal and oil from the huge mineral reserves in the San Juan Basin. With the price of natural gas and oil soaring during the past year, these companies have been posting record profits.

That's why allegations that the federal government has helped energy companies get sweetheart deals to operate on allotted Navajo land have captured the attention not only of Congress, but also of a federal district court in Washington, D.C. Testimony submitted to the court last week by an employee of the Interior Department alleges that a number of officials in the federal government were aware of these practices, possibly for years, and failed to stop them.

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