Reference no: EM133099762
Geologists working for the natural gas company Lumi- nate, LLC, are exploring the possibility of tapping into the Bakken shale formation, an unconventional shale play under Wyoming. The company's competitors have already entered into contracts with landowners near Pavillion, Wyoming, and drilling is underway across the Wind River Indian Reservation. Under treaty between the U.S. government and the Native American tribes, the land, water, and minerals of the Wind River Indian Reservation are held in trust for the tribes by the U.S. government, which must consult with the tribes before taking actions that affect their interests. In recent years, controversy erupted from Pavillion when gas- drilling operations in the area were linked to groundwater contamination by a draft U.S. Environmental Protection Agency study. Tribes expressed concern that neither the U.S. government nor the drilling companies were respect- ing their interests in the land. Under pressure from the gas industry, the U.S. EPA recently backed off the Pavillion investigation, and ceded authority over the matter to the State of Wyoming. Accord- ing to Darrell O'Neal, Sr., co-chairman of the Northern Arapaho Business Council, "EPA's recent action violates clear federal policy requiring agencies to engage in mean- ingful consultation with Tribes before taking action affect- ing tribal property or other interests." Doubts about the contamination lingered on the part of environmental advocates and community members. In other news, head- lines ran about questionable leasing practices and conflicts of interest amongst some of the wildcatting gas companies. The CEO of Luminate, LLC, owns ten acres of land in the Pavillion area. When she proposed that the company lease her land to drill for gas, the matter was put to the Board of Directors for a vote.
Questions for Case
1. How can the Board of Directors ensure that the transac- tion between Luminate, LLC, and the CEO, including the decision to purchase and the negotiated purchase price, is free from conflicts of interest?
2. How can Luminate, LLC, ensure that drilling opera- tions conducted on the Wind River Indian Reservation are responsive to stakeholders? Distinguish between social, economic, and environmental consideration