Royalty ruling impacts Indian trust

TUESDAY, APRIL 30, 2002

A little-noticed court ruling the Bush administration failed to appeal prevents the Department of Interior from recovering potential millions on behalf of tribal and Indian trust beneficiaries.

The 10th Circuit Court of Appeals last October sided with the drilling industry in a dispute over money owed on federal and Indian lands. In a 6-2 decision, the full panel of the court said the federal government can't recover additional royalties, plus interest, for certain underpaid leases.

The ruling was largely technical because Circuit Judge Wade Brorby, writing for the majority, centered on a six-year statute of limitations in federal law. He said the Minerals Management Service (MMS) can't order oil, gas and other companies to pay money for leases older than September 1, 1996.

The decision immediately affected Occidental Petroleum, one of the largest oil conglomerates in the world. MMS sought more more than $550,000, plus interest, for leases dating to the 1980s.

But there is a much wider benefit for the industry, which sided with Occidental and intervened in the case. Their court victory dashes hopes of settling disputes for money the companies would otherwise owe.

In Indian Country, the problem is compounded because of the lack of historic audits. Not until 1998, for instance, were auditors hired to ensure Navajo beneficiaries were receiving their full share of funds from oil and gas drilling.

Since then, an additional $1.7 million has been recovered for approximately 8,000 Navajo mineral owners. But "orders to pay" for the years 1984 to 1988 could be challenged, putting at least $2 million in royalties and interest at risk.

An additional $2 million is being sought under orders for 2000 and 2001, according to the Interior's Farmington Indian Minerals Office. Created in response to a lawsuit, the intra-agency office -- which houses officials from the MMS, the Bureau of Indian Affairs and the Bureau of Land Management -- serves Navajo beneficiaries in the Four Corners area of the Southwest.

Based on documents provided by the office, the government was lacking in fulfilling its fiduciary responsibilities to Navajo tribal members. Prior to the audits, the Interior only recovered an additional $1 million over a 15-year period.

In a dissent to the court decision, Circuit Judge Mary Beck Briscoe, joined by Judge Robert H. Henry, disagreed with the majority. Briscoe differentiated between lawsuits, which she said would be time-barred, and agency "actions," such as the orders to pay.

Get the Decision:
OXY USA, INC. v. BABBITT, No 98-5222 (10th Cir. October 10, 2001)

Relevant Links:
Navajo Nation - http://www.navajo.org
Minerals Management Service - http://www.mms.gov
Indian Trust: Cobell v. Norton - http://www.indiantrust.com
Trust Reform, NCAI - http://130.94.214.68/main/pages/
issues/other_issues/trust_reform.asp