CATTARAUGUS INDIAN RESERVATION - Newly elected Seneca Indian President Barry E. Snyder Sr. said he put a lot of thought into whether to pursue a fourth term as leader of the western New York Indian nation.

Who can blame him?

With the state a signature away from collecting tax from tribal cigarette sales and a mega casino project mothballed because of economic and legal challenges, even by a former warrior nation's standards there are tough battles ahead.

“A lot of our economic heart is at stake here,” Snyder said after being sworn in this month.

For more than 200 years, the Senecas were a little noticed band in the rural reaches of western New York, eventually building a modest reservation-based economy on tax-free gasoline and cigarette sales.

That changed dramatically in 2001, when the 7,300-member nation voted to go into the casino business. If approving a gambling referendum was a hopeful first step toward economic independence, the years since have been a full-out run.

Since 2002, the Senecas have built a $1.1 billion economy on three popular casinos and two luxury hotels and entertainment venues, broken ground on a topflight golf course to give high-rollers more reason to stay and swelled their payroll to 6,300 people.

In the meantime, they have convinced two governors to back off plans to collect taxes at its workhorse smokeshops, underlining a level of respect - or perhaps fear - its leaders have commanded.

Lately, though, the troubled U.S. economy has been opening potholes along the Senecas' business paths, tripping up plans for a $333 million casino-hotel project in Buffalo, and leading down-and-out New York state to pursue what it sees as a potential $400 million-a-year revenue stream - the taxation of cigarettes sold by Indian retailers to non-Indian customers.

Adding to the uncertainty is a federal legal challenge to the Senecas' existing temporary casino in Buffalo by a well-organized coalition of gambling opponents.

The Senecas are on the offensive. Only now, Snyder said, “instead of using weapons for battle, the Seneca warriors of the 21st Century rely on intelligence.”

In September, the nation made public a poll it commissioned from Zogby International, which it said concluded that most western New York residents believe Seneca businesses improve the region's quality of life. Most also think attempts by the state to impose taxes on Indian retailers would break historic treaties between Indian nations and the U.S. government guaranteeing the nation's sovereignty, the poll showed.

The poll has been followed by two multi-city print and broadcast advertising campaigns meant to convince Gov. David Paterson to veto the cigarette tax legislation, which would prohibit manufacturers from selling tobacco products without a state tax stamp to any wholesaler who doesn't certify the cigarettes won't be sold tax-free.

The Senecas say the state's earlier restrictions on credit card sales and shipping have already cut deeply into cigarette sales. In 2007, nation businesses sold 17.3 million cartons, down from 27.5 million cartons in 2005, according to Seneca figures.

But the New York Association of Convenience Stores says allowing any tax-free sales to continue puts the association's taxpaying members at an unfair disadvantage as they compete with lower-priced Seneca smokeshops.

“I think most fair-minded citizens would agree that if you contribute $1 billion a year to New York's economy, but stand in the way of the state collecting $1 billion a year in legitimate tax revenue it desperately needs, then your net economic impact on New York state is zero,” NYACS president James Calvin said.

Past attempts to collect taxes on reservation sales have been met with violent protests, including tire fires that shut down a portion of the New York State Thruway in 1997 - something no governor is eager to see again.

Paterson spokesmen have said the governor will review the bill and solicit input before making any decisions.

“He's got a tough job,” Snyder, 68, said of Paterson, who has estimated the state is $1.5 billion to $2 billion shy of balancing its budget this year.

The Senecas have had their own cash flow troubles.

In August, the nation cited “challenging economic and capital market conditions” before halting construction of the permanent Buffalo Creek Casino, leaving a skeletal steel frame where it had promised one of the largest private projects ever undertaken in the economically struggling upstate city.

Work also was suspended at the nation's existing casino and hotel in Salamanca, where a $130 million expansion was under way.

“You tell me when the economy is going to change around and I'll tell you when we're going to start building again,” Snyder said recently. “I don't think anybody can tell us that.”

In the meantime, a lawsuit by Citizens Against Casino Gambling in Erie County seeking to shut down a temporary Buffalo casino, which is operating pending completion of the larger one, continues in federal court.

In July, Judge William Skretny ruled casino gambling illegal on the site - leading opponents to ask him to go a step further and shut the temporary facility down.

“Four months is more than enough time to obey a court order,” said Cornelius Murray, an Albany attorney representing the group.

Snyder said the lawsuit has so far not gotten in the way of the larger casino plans, which are supported by Buffalo's mayor and county leaders, but he said the nation will begin taking a more active role in fighting it.

The nation, which because of its sovereign status is not a plaintiff in the suit, was recently given permission to file supporting papers and take part in a future hearing in the case.

Snyder foresees New York state eventually legalizing gambling and building its own casinos, making finishing the Buffalo project all the more important.