Why can't we?
Oenga heirs sue federal government over lease
- Heirs of Andrew Oenga, Inupiat, have initiated a historic $180 million lawsuit claiming the U.S. Interior Department failed to make equitable lease payments for oil that passed over the family;s property in Prudhoe Bay in Alaska's North Slope. Their case may be the first in which a family has brought suit against the federal government.
By David Melmer / Indian Country Today
Story Published: Nov 13, 2006
Story Updated: Sep 10, 2008
PRUDHOE BAY, Alaska - An Inupiat family may be the first family ever to file suit against the federal government for allegedly mismanaging a lease agreement with an oil company.
The family, descendants of Andrew Oenga, claims the federal government, specifically the Department of the Interior and BIA, failed to properly protect the family;s right to equitable lease payments for oil that passed over the property.
If the family prevails in the U.S. Court of Federal Claims, the financial award to the Oenga family could be an estimated $180 million. British Petroleum held the lease to the property over the past decade and is included as an interested party to the lawsuit. Any financial award would come from BP, according to the lawsuit.
''We are doing the only thing we could do. We put our heads together and decided to fight for what we believe in,'' said Joe Delia, spokesman for the Oenga family descendants.
''The federal government has been screwing over Natives since they came here; it has got to stop somewhere, there has to be justice somewhere,'' he said.
In 1971, Andrew Oenga applied for and received an allotment, located at Prudhoe Bay on the North Slope of Alaska. In the late 1980s the federal government negotiated a lease agreement with the oil companies. That negotiation was conducted in English and Oenga spoke only Inupiat, the lawsuit states.
The original lease allowed the oil companies, specifically BP and related subcontracted companies, to run a pipeline and road across the Oenga property; but the lawsuit claims that appraisals did not include appropriate royalty rates, therefore an arbitrary and lower rate was given to the property.
The original agreement was for a pipeline and road, but a drilling pad was constructed on the property later and an appraisal was not completed for that procedure, the lawsuit claims. Oil was subsequently extracted at the Oenga property location and BP paid only one-tenth of 1 percent for the right to extract the oil; the royalty rate, the family argues, should have been set at more than 4 percent, which was set by federal code. In addition, the lease agreement states that interest on unpaid royalties is to be assessed at 18 percent. The state has claim to the oil and gas rights, so the state would receive 12.5 percent of the royalties.
According to the legal documents, the federal government knew that BP intended to use the land for a multiple-head drilling pad, but an appraisal does not take that into account. Under federal regulations, appraisals must be completed every four or five years; the complaint filed in court claims that no appraisal has been conducted for the 2006 - '09 period. The family also claims that other appraisals were given to them late.
In 2005, the family demanded the secretary of the Interior give notice of default and of breach of failure to perform or comply regarding the leases. The government, the complaint states, did not issue any notice.
The complaint states that BP benefited from mismanagement of the lease agreements by Interior and therefore BP should be held financial liable.
The Oenga family is traditional. Their ancestors have occupied that region of the continent for thousands of years and, until recently, family members has lived a traditional subsistence lifestyle.
''The Inupiat community goes hunting and whaling and provides for the entire community, like living the old ways of living and taking care of each other. We go out and help, seal hunting and whale hunting. We lived and got the experience of the Indian way of life,'' Delia said.
Delia said the family is not allowed to hunt, fish or even visit the land. ''The have been taking advantage of the family for a long time, we want to see justice. They are taking a lot of oil out of there.'' he said.
A sod house is located on the property where his mother was born. ''We have to get permission to even go over there,'' Delia, who lives in Anchorage, said.
''There are eight of us in the lawsuit, but there are more descendants. Grandfather wanted a future for his family; that's what life is all about up here, taking care of family and providing for them,'' Delia said.
Delia worked for the oil industry, as do many people in that area. He drove a hazardous waste truck, but the hours were too much and ''I lost family over the work since I was never home,'' he said. He now works for the community in Anchorage.
There used to be priority hiring for the Alaska Natives in the oil fields, but Delia said it is hard for many of them to get to the fields now. Only a few small villages are within the region.
The Oenga family descendants also assert that BP has not been a good steward of the land by not cleaning up oil spills and not repairing corroded pipes. In March, a leak in a BP Exploration Alaska pipeline at Prudhoe Bay resulted in the North Slope's largest oil spill on record. Other spillages from pipelines have been reported by BP, but the March incident did not prompt the filing of this lawsuit, the Oenga family claims.
For oil or gas leases, federal law mandates that Interior collect a royalty rate of 16.66 percent of the value of production. The caveat to that law is that the secretary has a right to negotiate a lesser amount if it is in the best interest of the allottee.
''Neither the Secretary of Interior, nor his designee, has ever made a determination that it is in the best interests of the Plaintiffs to receive a royalty or rent less than provided by [federal law],'' the complaint states. The federal law that applies to this is 25 CFR paragraph 212.41(b).
The complaint further claims that the federal government collected an amount of royalties far under what should have been collected for the period from 1994 - 2001, which was $670,000. The amount that should have been collected, at a rate from 2.5 percent to 4.5 percent, was estimated to be in the double-digit millions.
The multi-well pad on the Oenga property is designed as a directional drilling process. The complaint states that BP allowed access to the pad by ARCO Alaska and Exxon Corp. to extract oil from an area adjacent to the Oenga property, known as the West Kiakak P.A., as designed by the state.
The family received no notice of this action, and members have received no royalties. The two companies had lease agreements on property situated over the oil deposits, but not for Oenga property.
Production figures indicate that 40 percent of all oil production through the Oenga multi-well pad came from the adjacent oil deposits. The lease agreement, the complaint argues, does not allow for the production of oil or gas from the adjacent oil deposits. The unauthorized extraction of oil through the Oenga family property from the West Kiakak area constitutes a breach of trust responsibility on the part of the federal government, the complaint states.
The Oenga family is asking the court to make a determination of compensation to them. The $180 million figure, only an estimate of the potentially final determination, is not what the family is asking.
Other families that have land leased to the oil industry are doing well. Delia said they had people who spoke English when the contracts were originated.
''We were misrepresented by the government and we want what the other surface owners were paid; they took advantage of an old man who didn't understand English,'' Delia said.
''Some of us think the government can do what they want; they make the laws and break the laws and do what they want. They can uphold any deal or treaty, but as far as we are concerned they have never upheld any treaty. It is sad to see how Indian people are being treated,'' Delia said.