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History and Culture

Home  >  History and Culture  >  Ancsa at 30  >  Lecture Series
Lecture Series, Number Four  -  Page 5
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Chancellor Lee Gorsuch: There were significant issues associated with the land selection process. And here I want to share with you some of the difficulties. All of us see the world through the lens of our own experience. It is very difficult to see the world any differently than the way I’ve grown up to view and to see it. I came in as an economic advisor, and so I was thinking about the economics of the Settlement Act and how the Native corporations could maximize their economic power. My boss and I are old school in the sense that this was about self determination, and to the extent it was going to be self determining. The more economic power you had, the more likely you could be an influence in representing your own well being and get out from under the colonial dimensions of governance.

I traveled the state, and had the opportunity to work with groups all over Alaska, in preparation for the land selections. It was a very difficult process, because I would be looking at what lands around villages and in regions had significant economic value. Did they have petroleum potential? Did they have coal potential? Did they have timber potential? I was basically taking the approach that the best way to maximize your leverage was to get those lands and resources that hold the most economic value. If you got those lands, you would preempt other people coming in and you’d maximize the land control. Yet, many of the villages and regions were interested in obtaining lands that had significant historic value for them. Therefore, in the final analysis, they had to choose whether to select lands on the basis of economic capacities of influence or on the basis of their historic and cultural value. These were very difficult choices to make, and whether or not a decision could be considered successful depended on your perspective of what you were trying to achieve.

There were also enormous issues associated with the state, as it had the right to try to ensure access for transportation. When the state started filing these right-of-way requests across the state’s landscape, it looked like a bowl of spaghetti--almost everything was a transportation corridor. The politics surfaced again as the state tried to get reasonable interpretation of its rights and powers to designate transportation corridors to secure the most desirable approaches for Alaska’s economic development.

The corporations then had to get into the business of setting up their bylaws. This introduced some very challenging issues, and some very significant politics within the Native communities themselves. The corporations had to decide how many seats they were going to have on their corporate boards. Were they going to require residency in a particular village for a seat on the board? Would they allow individual shareholders to accumulate their votes? If you had accumulative voting, a relatively large village could accumulate all of its votes and pretty much guarantee the election of someone to represent them on the board of directors.

There were many, many issues in what appeared to be, otherwise, a very simple process of incorporation. These issues had profound implications as to who would govern these regional corporations and who would govern these village corporations.

In many cases, the full implications of these issues were not particularly well understood by many of the people who were actively involved or who would be impacted by the process of drafting bylaws for the corporation. There were lots of issues then associated with retaining all the technical advise associated with accounting, for example. Under Emil’s leadership -- when he was president of what was then called the AFN Charitable Trust, and is now the Alaska Native Foundation -- we were able to secure funds from the Ford Foundation to begin to draft some of the outlines for how to set up the accounting systems. What would be the value of land that should be put on the books of the corporations, because if it didn’t have a certain value, you’d have to pay a potential tax on it once it began to achieve value? So how you initially placed valuation of your land entitlement was a significant issue. The questions on 7(i) that Mary had referred to were very controversial. The questions about how those would actually be structured went on for several years.

I think it was John Shively who mentioned it was under Byron’s leadership, after a protracted period of lawyers arguing back and forth with accountants about how to deal with this, it really became a political settlement. Under Byron Mallott’s leadership, they were able to go off to a retreat setting; I think they kicked most of the lawyers out of the room and worked out a settlement as to how they were going to administer the provisions of 7(i), wherein one corporation that had the original subsurface estate of 30 percent would have to share the other 70 percent with the other corporations. There were political issues involved in subdividing the surface estate from the subsurface estate. A village corporation could own the surface estate, but the regional corporation would own the subsurface estate.

You can imagine the sensitivities when a regional corporation was trying to generate profits through its land entitlements to generate dividends back to its shareholders, and it might adversely impact a village that would prefer that its surface estate be undisturbed. Again, there were sort of built-in conflicts that had to be mediated, or litigated in some cases, among the regions and the villages. It became particularly problematic when you dealt with gravel. Is gravel a surface estate or a subsurface estate? Those were very difficult issues for groups to work through.

After the enrollment process and the initial incorporation and selection of lands, I became actively involved in the implementation of the initial investment activities of the corporations. Here it became extremely difficult. Once Congress passed the act, it had no appropriations for the corporations to get organized. For the first year there was no money associated with implementation. The corporations were pretty much on their own. Finally, the secretary came up under special admonition to give the regional corporation a half a million dollars to get themselves organized, but up until that point, they had no money to do any of this activity. It really put a lot of them behind the eight ball in terms of carrying out this enormous amount of work. It turned out that, as the village corporations began to get themselves organized, we wound up discovering these unfortunate situations where relatively small villages were required by law to submit an annual audit for their affairs. In many instances it turned out the cost of these audits might be $30 thousand, and they didn’t make $30 thousand. The cost of the audit for the reports was costing them more than the actual net earnings of the village corporation. Ideas about economies of scale became a very important and significant issue.

I’ll let Willie talk about how NANA decided to solve this problem. Some of the regional corporations went through the process of looking at merger possibilities in order to achieve larger savings, but then had to address the question about who would be in charge of the corporation once the merger occurred. I worked with villages on the upper Kuskokwim where 11 villages came together. First they formed a management corporation in order to pool their resources and lower their overall costs. They eventually merged to become the Kuskokwim Management Corporation; 11 villages merged into a single and separate management entity. There were some out on Nelson Island that also came together and merged as a single entity.

In all cases, the village corporations were extremely taxed to try to become successful for-profit corporations. At one of our earlier seminars, somebody questioned why the villages went non-profit instead of for-profit when the act itself said you could choose which one you wanted to be. Well it turned out state law did not allow non-profit corporations to distribute dividends to individual shareholders, you had to be a for-profit corporation to do that. So again, villages didn’t have the option of going for non-profit status, because they were all required by federal law to have shareholders to whom dividends would be distributed, and for which dividends would be their entitlement.

Many of these early stages of village investments were extremely difficult. They had limited experiences in the world of finance. In some cases, their first temptations were to buy those things that were local -- stores, taxi services, and fuel distributorships. Often times they paid an inflated price and then they had to turn around and hire people back. Previously, the owner might have been the one who actually provided the store, but by the time they actually had to hire people and pay overtime and so forth, many of these enterprises became unprofitable. It created negative politics inside the villages and people criticized them for not extending fuel service, because they couldn’t pay the fuel bill. It really posed some very difficult challenges on the part of villages. Overall, it was a Herculean test.

I’ll close with one last observation. Tom, you mentioned that in the Settlement Act there was a provision called section 2(c). Under section 2(c), the fear was that it was termination language and that it was extinguishing aboriginal rights. There was to be a study as part of the act as to determine whether or not the programs to which Alaska Natives previously had been entitled should continue. The firm I was with, Robert R. Nathan Associates, was asked to do the study. The study determined that these were separate statutory actions under which Alaska Natives had benefits attached to the provisions. So, if it was in housing or education or what have you, then it had nothing to do with the Settlement Act itself.

The point I want to leave you with is this. This group of largely young people became extraordinarily successful as political activists. They became very sophisticated lobbyists, and I actually attribute a series of national legislation that followed to them: the Indian Self Determination Act, the Indian Finance Acts and I could go on with a series of others, all followers of the Alaska Native Land Claims Settlement Act. I think, in part, this significant amount of legislation was achieved because of the Alaska Native leadership. In those acts that followed, many benefits came to Alaska in the form of nonprofit organizations.

Today, my guess is the nonprofit organizations in health, housing, and social services probably employ more people than the corporations do themselves. I doubt, although I can’t prove this, that those nonprofit organizations would not have the power, the authority or the financial success they have today had it not been for the success of the leadership in bringing about enactment of the Native Land Claims, and their political savvy in terms of how to continue to work toward improving legislation and enacting subsequent legislation for the benefit of Native people. I think the economic and political clout accumulated through the Native Settlement Act has brought benefits far beyond those of corporate dividends and employment. These benefits are often lost in the conversations and controversy that surrounds the issue of the Native Land Claim Settlement Act. Tommy, I’ll stop there.

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