Oil and Gas on Indian Reservations: Statistical Methods Help to Establish Value for Royalty Purposes

Part of the history of oil and gas development on Indian reservations concerns potential underpayment of royalties due to under-valuation of production by oil companies. This paper discusses a model used by the Shoshone and Arapaho tribes in a lawsuit against the Federal government, claiming the Government failed to collect adequate royalties. Portions of the case have been settled out of court with compensation paid to the Tribes. Other portions remain pending. This material can be used as a real example in a calculus-based probability and statistics course.