Suрerior Oil Company (Superior) appeals from the District Court’s dismissal of its amended complaint seeking declaratory, mandamus and injunctive relief against the United States, the Secretary of the Interi- or, other officers of the Department of the Interior, the Navajo Tribe of Indians, its Council, and certain named tribal departments and certain Navajo Indians, sued individually and in their official capacities. Jurisdiction was asserted under the Fifth Amendment and the Fourteenth Amendment of the Constitution of thе United States, 28 U.S.C. § 1331 (federal questions), § 1332 (diversity of citizenship), § 1343 (mandamus), § 2201 (declaratory relief), 5 U.S.C. § 701, et seq. (Administrative Procedure Act), 25 U.S.C. § 1301 (Indian Civil Rights Act), and 25 U.S.C. §§ 396a-396g (Omnibus Indian Mineral Leasing Act of 1938).
The action involves rights asserted by Superior to explore for oil and gas on tribal lands under oil and gas leases granted by the Navajo Tribe, and approved by the Secretary pursuant to 25 C.F.R. § 211.20(b) (1984). Superior claims that the statutory and regulatory scheme governing Indian oil and gas leases is such that the Secretary of the Interior has exclusive regulatory control and that this authority preempts regulatory control by the Navajo Tribe. Further, Superior contends that the Secretary has failed and refused to act to approve certain assignments. Superior also claims that the Navajo Tribe and certain Navajo officials have intentionally and purposely sought to deprive Superior of its property interests in the oil and gas leases by refusing to allow Superior to undertake seismic operation with the sole purpose and intent of having the leases expire, constituting unlawful confiscation of Superior’s property rights. Superior alleges that said action is not within the scope of the Tribe’s sovereign powers and is in conflict with an overriding national interest to prevent such deprivation. The District Court, in granting defendants’ Motion for Summary Judgment, dismissing Superior’s complaint, ruled that (a) the court was without jurisdiction to grant relief against the Navajo Tribe and its named officials based upon the sovereign immunity of the Tribe, and (b) there is no case or controversy involving the United States or its named officials. The court further ruled that the appropriate initial forum for presentation of Superi- or’s complaint is with the Tribal Court.
See, Superior Oil Company v. United States,
The Background
In viewing the evidence in the light most favorable to Superior, as we must in light of the trial court’s grant of a summary judgment in favor of defendants,
see Clark v. Atchison, Topeka & Santa Fe Ry.,
Superior and Arapaho Petroleum, Inc., non-Indian corporations, filed this action seeking declaratory and injunctive relief requiring approval of cеrtain oil and gas lease assignments and permits to undertake pre-drilling seismic exploration on tribal lands subject to the leases. The lands concerned are situate in San Juan County, Utah, within the boundaries of the Navajo Reservation.
*1326 One count concerned two leases executed by the Tribe, as Lessor, approved by the Secretary of the Interior, and Arapaho, as Lessee. After issuance, Arapaho designated Superior as its operator and agent under a Farmout Agreement. Superior thereafter undertook seismic activities on the leased lands pursuant to permits issued by the Tribe and Secretary and then obtained drilling permits. Before drilling, Superior determined that further seismic exploratory work was required in order to judge the best location for the wells. Prior thereto the chairman of the Navajo Tribal Council had requested that Arapaho renegotiate the royalty rate on each of its leases. Even though Superior believed that the Seсretary of Interior had exclusive authority and right to issue such permits, it requested of the Navajo Tribal Council, as an expression of cooperation, permission to undertake the seismic testing. The Navajo Council had promulgated ordinances requiring, inter-alia, tribal approval of assignments of oil and gas leases and permits to undertake seismic tests all in the interest of public safety and tribal economic security. When it became apparent that the tribal officials would not grant Superior’s seismic permits prior to expiration of the primary terms of the leases, Superior filed this suit to avoid the expiration of the ten year term of the leases. A preliminary injunction was granted declaring the leases extended so long as the Navajo Tribe failed to act on the seismic permit requests. The Secretary of the Interior refused to approve the issuance of the seismic permits without the approval of the Tribe. The Department of the Interior suspended thе primary term of one of the two leases for the reason that the laws, regulations and policies of the Navajo Tribe had denied approval of Superior’s applications for permits to drill. (R., Vol. V, Exh. 71, p. 3.) The other lease came into production before expiration of the primary term and is no longer at issue.
Superior, in recognition of a dispute concerning the proposed seismic testing insofar as surface damages were concerned, offered tо escrow surface damage money, which had been a standard procedure of the Navajo Land Development office. (R., Vol. IV, Exh. 4, p. 2.) This request was likewise denied. A staff employee of the Navajo Tribe had been instructed to find any reason to deny Superior’s request. (R., Vol. XV, pp. 143, 144.) The only reason given by the Tribe for refusal to act on the permits was that only Arapaho was entitled to make such applications because it alone was entitled to conduct drilling operаtions under the leases. This position was apparently anchored to the view that the Farmout Agreement between Arapaho and Superior did not accomplish an assignment of lessee rights under the leases to Superior. The Tribe required, under its ordinances, that assignments of leases be submitted to the Tribe for approval. Superior has not recognized this authority and has submitted the request for seismic permits only in the spirit of cooperation.
The second count of the amended сomplaint related to a lease which had been issued to Gulf Oil Corporation, as lessee. In this instance, too, Superior had been designated as operator and local agent, and thereafter Superior requested a seismic permit from the Secretary and the Tribe. Thereafter, Gulf assigned the lease to Superior. Superior alleged that the Tribe willfully failed and refused to act on the assignment or the application for seismic permit, with intention to require expiration of the lease so as to renegotiate better lease terms for the Tribe. The tribal chairman denied the right to undertake seismic operations on the lands covered by this lease because it “[wjould be in the economic interests of the Tribe” if the lease should expire. (R., Vol. IV, Exh. 35.)
The third count involved some seven leases relative to which Superior had filed for approval of assignments or operating rights. No action has been taken by the Secretary or the Tribe. Superior sought mandamus relief to compel the Secretary and the Navajo Tribe to approve the assignments of leases or to declare that tribal approval was not required. Superior’s position relative to the Secretary of Interior *1327 was that the Secretary was without authority to grant seismic permits or, if so, they should have been granted; further, that the Secretary has sole authority to approve assignments or if such approval is dependent upon prior approval of the Tribe, the court should order the Secretary to approve the assignments.
The Navajo Tribe’s ordinance of December 16, 1983, provided that no assignment of mineral interests in Navajo lands shall be effective until approved by the Chairman of the Navajo Tribal Council. This ordinance did not meet with the approval of the Acting Area Director of the Bureau of Indian Affairs. (R., Vol. II, p. 313.) Even so, the District Court concluded that the ordinance is authorized under the inherent sovereignty retained by the Navajo Tribe “[t]o determine whether to issue a seismic permit to lessees” and “to approve and disapprove assignments of leases and operating rights.”
On appeal, Superior contends that (1) the District Court erred in granting the defendants’ Motion for Summary Judgment and dismissing its amended complaint because that court has federal question jurisdiction pursuant to 28 U.S.C. § 1331, and is the *1328 proper forum to determine the rights and duties of the parties at issue under the tribal oil and gas leases controlled by federal law; further, the Secretary of the Interi- or has a duty to act upon the lease assignments and requests to perform seismic tests and should be compelled to act, (2) the Navajo tribal ordinances affecting the Superior lease assignments and requested seismic operations are in conflict or inconsistent with federal regulations, policies and objectives creating an impasse between the Secretary of the Interior and the Tribe; Congress has expressed an overriding interest in national uniformity in the enactment of the Indian Mineral Leasing Act of 1938, supra, relating to the development and recovery of oil and gas on Indian lands; thus, exclusive regulatory control and administration of oil and gas operations on Indian lands vests in the Secretary of the Interior, and (3) the Navajo defendants have sought to advance the Tribe’s commercial position against Superior under the guise of regulation while seeking termination of Superior’s leases for the Tribe’s commercial benefit, all of which is inconsistent with and preempted by federal law and overriding national interests.
I.
The Jurisdictional Issue
The District Court did not have the guidance of
National Farmers Union Ins. Cos. v. Crow Tribe of Indians,
The Supreme Court, in reversing and remanding, held that the federal district court did have jurisdiction under 28 U.S.C. § 1331 inasmuch as the action did arise under federal law encompassing the federal question whether the tribal court had exceeded the limits of its jurisdiction. However, the Supreme Court directed that before the federal district court can enter *1329 tain the question whether the tribal court has power to exercise civil law subject matter jurisdiction relating to civil disputes between Indians and non-Indians arising on an Indian reservation, tribal court remedies must first be exhausted.
The Supreme Court observed that the right asserted by the petitioners was the right to be protected against an unlawful exercise of tribal court judicial power, based on federal law defining the outer boundaries of an Indian Tribe’s power over non-Indians. The petitioners there, just as in the case at bar, contended that federal law had divested the Tribe of that aspect of sovereignty. The Supreme Court, while expressly holding that § 1331, supra, vests jurisdiction and power in a federal district court to determine whether a tribal court has exceeded the lawful limits of its jurisdiction, nevertheless required that all available tribal court remedies must first be exhausted. The policy of exhaustion would afford the tribal court the first opportunity to evaluate the factual and legal bases for the challenge and it would require that court to examine carefully the Tribe’s sovereignty, the extent to which tribal sovereignty has been altered, divested or diminished, together with a detailed study of relevant statutes, Executive Branch policy embodied in Treaties and elsewhere, and administrative or judicial decisions. The Court left the question whether, during the time period required for exhaustion of Tribal Court remedies, the federal action should be dismissed or merely held in abeyance for determination of the federal District Court.
The reach and extent of a tribal court’s jurisdiction over a non-Indian is far from determined.
National Farmers Union Ins. Co. v. Crow Tribe, supra,
detailed the processes required to evaluate such a question. This process is in keeping with the Supreme Court’s observation in
Montana v. United States,
To be sure, Indian Tribes retain inherent sovereign power to exercise some forms of civil jurisdiction over non-Indians on the Reservations, even on nоn-Indian fee lands. A Tribe may regulate, through taxation, licensing, or other means, the activities of non-members who enter consensual relationships with the Tribe or its members, through commercial dealings, contracts, leases, or other arrangements. A Tribe may also retain inherent power to exercise civil authority over the conduct of non-Indians on fee lands within its reservation when the conduct threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the Tribe.
We hold that in cases encompassing the federal question whether a tribal court has exceeded its lawful limits of jurisdiction involving an exercise of civil subject-matter jurisdiction in a case such as that presented here, the federal district court is empowered to review a tribal court decision under 28 U.S.C. § 1331. However, the District Court erred in reaching the question whether the Navajo Tribe, its agencies and named officials are immune from the Superior suit by virtuе of the doctrine of sovereign immunity before requiring Superior to first exhaust its claim in the tribal court.
II.
The Bad Faith Issue
The District Court relied heavily on a line of decisions which have expounded on the scope of Indian tribal sovereignty, not only in relation to tribal immunity from suit but also in relation to tribal rights to protect tribal economic security. With respect to oil and gas leases entered into pursuant to the Omnibus Indian Mineral Leasing Act, the court stated that: “The inescapable result of
Merrion [Merrion v. Jicarilla Apache Tribe,
Footnote 21 of National Farmers Union Ins. Cos. v. Crow Tribe, supra, interposed a caveat to the court’s requirement that tribal court remedies must first be exhausted before the federal district court can assert jurisdiction under 28 U.S.C. § 1331:
We do not suggest that exhaustion would be required where an assertion of Tribal jurisdiction “is motivated by a desire to harass or is conducted in bad faith,” cf. Juidice v. Vail,430 U.S. 327 , 338 [97 S.Ct. 1211 , 1218,51 L.Ed.2d 376 ] (1977), or where the action is patently violative of express jurisdictional prohibitions, or where exhaustion would be futile because of the lack of an adequate opportunity to challenge the court’s jurisdiction.
Throughout this case, the Navajo Tribe and its officers have recognized that federal regulations promulgated by the Secretary of the Interior requiring approval by the Secretary of assignments of oil and gas leases and other such actions are valid; however, they contend that such does not prohibit the Navajo Tribe from promulgating like regulations. This, we submit, is not an adequate response to Superior’s complaint that the Navajo Tribe and its named officials have intentionally refused to act on the lease assignments and the requests for seismic permits in order to effect termination of the leases for nondevelopment during the primary term. This does constitute an allegation of bad faith on the part of the Navajo Tribe and the named Navajo officials.
There are depositions and exhibits in the record on appeal relied upon by Superior to support the contention that the Navajo Tribe and its officers intentionally withheld approvals of assignments and seismic requests in order to force renegotiation of existing leases. Whether these actions are sufficient in fact to constitute bad faith is a question for determination by the District Court. In
Tenneco Oil Co. v. Sac and Fox Tribe of Indians,
The District Court did not specifically address the issue of bad faith and confiscatory actions on the part of the Navajo Tribe and the named Navajo Indian defendants. *1331 This record contains many depositions, affidavits and exhibits. The question exists whether the Navajo Tribe and its officials arbitrarily and intentionally withheld action on the requests of Superior in order to destroy the value of the leases.
Conclusion
In light of National Farmers Union Ins. Co. v. Crow Tribe, supra, we reverse the District Court’s ruling that it is without jurisdiction to entertain Superior’s amended complaint by virtue of the sovereign immunity of the Navajo Tribe, its agencies аnd named officials. That decision stands for the proposition that the federal district courts shall exercise jurisdiction in cases such as this involving federal questions, pursuant to 28 U.S.C. § 1331, after all available remedies have first been exhausted in the tribal court, unless exhaustion would be futile.
In this case, Superior has alleged that the Navajo Tribe, its agencies and named officials have acted in bad faith. The District Court has not specifically addressed this contention.
We reverse the District Court’s dismissal of the Superior amended complaint on the basis of the sovereign immunity of the Navajo Tribe of Indians and the individual Navajo officials. We remand to the District Court with instruction to undertake such further proceedings deemed necessary to determine whether the actions of the Navajo Tribe of Indians and the named individual Navajo defendants in withholding consent to assignments of leases and requests for seismic permits were taken in bad faith or motivated by a desire to harass such as to render exhaustion of Navajo Tribal Court remedies futile.
We have not addressed other contentions of error involving issues decided by the District Court including whether (a) the federal regulatory scheme involving oil and gas leasing and operations on Indian tribal lands is such that the Navajo Tribe of Indians is preempted from entering the area, (b) there exists a case or controversy between Superior and the United States, and (c) the individual tribal defendants were acting in their official capacities. We believe that it is premature to reach these contentions.
REVERSED and REMANDED.
Notes
. 28 U.S.C. § 1331 provides:
(a) The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or Treaties of the United States.