News > Judge advances suit over royalty mismanagement

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Judge advances suit over royalty mismanagement
Friday, October 3, 2003

The federal government has a trust responsibility to ensure the collection and payment of royalties even when tribes take greater control of their affairs, a federal judge ruled last week.

In a long-running dispute over oil and gas royalties, the Bush administration argued that its trust duties were lessened because the Eastern Shoshone Tribe and the Northern Arapaho Tribe signed a cooperative audit agreement with the Minerals Management Service (MMS). "[S]omewhere along the line, the United States should be entitled to rely on obligations that the tribes assumed," government attorneys said in court papers.

On September 26, Judge Emily C. Hewitt of the U.S. Court of Claim denied the government's defense. Rejecting a summary judgment motion, she said the agreement "does not diminish the trust duty owed" to the tribes because it was meant to "enhance" and not replace the trust relationship.

"As a threshold matter, it is clear to the court that there is an obligation imposed by law on defendant to ensure the prompt and proper collection and disbursement of royalties," Hewitt wrote in the 27-page decision.

The two tribes, which share the Wind River Reservation in Wyoming, filed suit in 1979. In the part of case at issue in the court's decision, they allege MMS failed to collect the full amount of royalties from a settlement between oil and gas companies. They also allege they lost out on money for other leases because MMS failed to collect data when its computers broke down.

Government attorneys responded that MMS doesn't have to ensure the tribes received all their royalties because they accepted auditing duties under a cooperative agreement with the agency. They asked to be relieved of paying damages on the settlement and on the other leases.

Citing the Supreme Court's recent decisions in U.S. v. Navajo Nation and U.S. v. White Mountain Apache Tribe, Hewitt concluded that MMS has a duty to account for the royalties even though the tribes assumed a greater role. She noted that the Federal Oil and Gas Royalty Management Act (FOGRMA), which authorized cooperative agreements, was passed because Congress recognized that the Department of Interior wasn't honoring its obligations.

"The portions of FOGRMA that allowed for cooperative agreements reflected the reality that, at the time the legislation was passed, the Secretary was not fulfilling his responsibilities to the Indian tribes," Hewitt wrote.

The ruling allows the tribes to move forward on seeking additional money from the settlement. Arco, one of the companies involved, only paid royalties on $20 million of a $39 million settlement. The tribes contend they are owed royalties on the full amount.

The tribes can also move forward on recovering money on the other leases although Hewitt limited how much damages they may be owed. She denied two breach of trust claims, concluding that they didn't satisfy the Navajo-White Mountain framework.

The Navajo and White Mountain decisions were handed down this past March. In the Navajo case, the Supreme Court said the federal government didn't owe damages for a coal lease because the tribe negotiated the terms. Interior's role as a trustee, the majority wrote, was reduced to an advisory one. The White Mountain Apache Tribe won its case because the court said the government had control over the tribe's trust asset.

Although Bush officials have played down the impact of the two decisions because breach of trust claims are fact-specific, Hewitt has cited them as precedent. Government attorneys have cited them in other trust cases in an attempt to escape liability.

MMS is responsible for collecting about $6 million in annual oil and gas revenues from federal and Indian lands.

Get the Decision:
Shoshone v. U.S. (September 26, 2003)

Earlier Decision:
Shoshone v. U.S. (June 9, 2003)

Relevant Links:
Eastern Shoshone Tribe - http://www.easternshoshone.net
Northern Arapaho Tribe - http://www.wrtsc.org/NorthernArapaho.htm
Minerals Management Service - http://www.mms.gov