The Act of 1933 and 1968 Amendment

To understand UNTF programs and the permitted uses of assets, it is important to understand how and why the Fund was created. Prior to 1920, a person who desired to extract oil, gas, and minerals from Federal land was permitted to acquire ownership of the land by complying with certain requirements. When the development of the natural resources on those lands required the building of public roads, public schools, and the provision of police protection, local governments were able to pay for those improvements and services by imposing a tax on the property.

By enactment of the Mineral Leasing Act of 1920, 30 U.S.C. §§ 181-287, Congress withdrew vast areas of public land from eligibility for acquisition by private parties. In place of private ownership, the Mineral Leasing Act provided a process by which private parties could enter into leases for the development of minerals, including oil and gas on public lands.

Congress was aware of the hardship that would be imposed on state and local governments by the Federal government retaining ownership and leasing out the mineral rights. In Committee hearings as recorded in the Congressional Record-House October 30, 1919, p. 7769, the concern was raised that:

If this bill brings the operations which its friends predict, great enterprises will be established, towns will be built, roads must be constructed, schools must be maintained, local governments must be supported, the States must police and protect the properties. Titles to all the lands are to remain in the Federal Government exempt from taxation. Where are the States and counties to get the money?

That hardship was particularly great in Utah where 75% of the land within state boundaries was owned by the Federal government.

The House Committee on Public Lands decided that "...the States from which the minerals were taken should have an interest in the rentals and royalties, in lieu of [property] taxes, which ordinarily are available to States and counties."  Congressional Record-House October 30, 1919, p. 7769. Accordingly, §191 of the Mineral Leasing Act provided:

... 37 1/2 percentum of the amounts derived from such bonuses, royalties, and rentals shall be paid by the Secretary of the Treasury . . . to the State within the boundaries of which the leased lands or deposits are or were located.

The Act of February 25, 1920, 41 Stat. 437. Section 191 restricted the use of the States share to use " . . . for construction and maintenance of public roads or for support of public schools or other educational institutions, as the legislature of the State may direct."

The fund that eventually became known as the Utah Navajo Trust Fund originated with an Act of Congress in 1933. That act added an area of Federal land in southern Utah, known as the Aneth Extension, to the Navajo Reservation. The State of Utah initially objected to passage of the Act because the transfer would have resulted in the State losing the 37 ½ percent of royalties regarding that land but still having responsibilities for the construction of roads and schools in the area with no power to impose a property tax or receive royalties on the Extension to help pay the expenses of those roads and schools. To resolve the State's objection, the 1933 Act was amended before passage. Referring to the version that passed, the United States District Court for the District of Utah explained:

In order to compensate the State for the resulting loss of tax revenues and increased need for governmental services, the Act provided, inter alia, that 37 ½ % of net royalties from oil and gas production within the Extension were to be paid to the State of Utah: "provided that the 37 ½ percentum of said royalties shall be expended by the State of Utah in the tuition of Indian children in white schools and/or in the building of maintenance of roads across the lands described in section 1 hereof, or for the benefit of the Indians residing therein." 47 Stat. 1418 (1933).

Bigman v. Utah Navajo Development Council, No. C 77-0031 (C.D. Utah Sept. 25,1978). Thus the 1933 Act, as finally passed, allowed the State of Utah to keep the 37 ½ % it had been entitled to under the Mineral Leasing Act and to use it for essentially the same purposes, i.e. roads and schooling. The compromise did require, however, that any roads built be on the Extension or for the benefit of the Native Americans residing on the Extension and that any funds used for schooling be limited to the payment of tuition for Native American children in white schools.

At the request of the State of Utah, the 1933 Act was amended in 1968 to allow the State greater flexibility in how the funds are used. Rather than continuing to limit the use of the funds to roads and schools, the Amendment allows the State to now use the funds for any general government obligation or other approved usage that promotes "the health, education and general welfare of the Navajo Indians residing in San Juan County." Public Law 90-306. The 1968 Amendment also allows the funds to be used for projects and facilities that are not exclusively for Navajos residing in San Juan County provided that the Funds' contributions to such projects and facilities are proportionate to the benefits to be received by Navajos residing in San Juan County. See Public Law 90-306 and Bigman v. Utah Navajo Development Council, C77-0031 (C.D. Utah Sept. 25, 1978).