NEW YORK (AP) - State Police have speculated that any government effort to block the flow of tax-free cigarettes onto New York's Indian reservations will lead to violence and could possibly escalate into a "military problem," an adviser to Gov. David Paterson said Tuesday.

The governor's chief legal counsel, Peter Kiernan, told a state senate committee that a police "threat assessment" predicted that tribes based in western New York would fiercely resist any attempt to interfere with their multimillion dollar cigarette business.

The cost of enforcing order, he said, could run as much as $2 million per day - a figure based on the state's experiences when it tried to impose cigarette taxes on the reservations in 1992 and 1997.

Both of those efforts ended after members of the Seneca tribe blockaded state highways, set fires and in some cases brawled with troopers.

Questioned by skeptical lawmakers, Kiernan declined to reveal how the State Police came to the conclusion that there might be bloodshed, other than to say it was based on law enforcement "intelligence."

Scores of Indians from across the state who traveled to the city to attend Tuesday's hearing by the senate's committee on investigations and government operations listened largely impassively as Kiernan discussed the potential for violence, although a few seemed offended at the suggestion that they would be the instigators of any conflict.

Still, J.C. Seneca, tribal councilor to the Seneca Nation, made it clear that the tribe takes its sovereignty seriously.

"Your government has no authority to collect taxes in our territory," he said, citing 19th Century peace treaties that, among other things, gave the Seneca control over land and freed them from any state taxes.

"We will fight to uphold these rights, now and forever," he said.

A small group of Seneca expressed their defiance Tuesday by lighting a fire near the state Thruway on the Cattaraugus reservation - an action that mirrored protest fires set in 1997. State Police Capt. Michael Nigrelli said traffic wasn't disrupted, and Seneca leaders assured state police the demonstration would remain peaceful.

New York already has a law on the books assessing taxes on cigarette sales to all consumers who are not members of a tribe, but a series of governors has declined to enforce it, in part because of the fear of unrest.

As a result, reservation shops have become some of the biggest cigarette suppliers in the state, selling hundreds of millions of packs a year.

Some of that product is bought by smugglers, who transport cartons of cigarettes off the reservations and resell them elsewhere. A sizable percentage also is sold over the Internet to buyers around the country.

Paterson has pursued a dual track with the tribes, attempting to negotiate while also litigating the tax issue in state courts. Tribes in other states have signed revenue-sharing compacts with the states regarding taxation on cigarettes, but most of the largest New York tribes have rejected any such compromise.

State Sen. Martin Golden, a Brooklyn Republican and a member of the committee on investigations and government operations, said during Tuesday's hearing that the time for negotiating is over. He said he favors a "drop dead" date, to start charging the tax whether the tribes agreed to it or not.

Wagging his finger at Indians in the audience, he said the U.S. victory over the British during the Revolutionary War gave the government the right to tax its citizens, and he suggested that the tribes benefited from state health, education and public works programs and should therefore be required to pay the same taxes.

"Is it too much to ask?" he said.

His comments were met with boos, and he was jeered again as he left the room.

Among members of the tribe, the issue is a simple continuation of a pattern that dates back centuries.

Arthur "Sugar" Montour, owner of the Seneca brand cigarette company, stood up before the start of the hearing, called himself a warrior and thundered that it was the state - not the tribes - that were the aggressors.

"Today is about taking away the birthright of our people," he said.

"It's just taking our land all over again," Sally Snow, chairwoman of the Seneca Free Trade Association, said during a break in the hearing. "How much do they want from us?"

Kiernan said the governor is ready to enforce state tax law, but hopes to avoid conflict through negotiation.