Prudhoe Bay Alaska

The following story in the Anchorage Daily News shows that the Interior’s Department trust land management system still needs improvement. — Jodi Rave

By ELIZABETH BLUEMINK

Modified Jan. 5, 2011

BP shut down a small portion of the Prudhoe Bay oil field last week after a judge ruled that federal regulators failed for years to get approval from the Inupiat Eskimo family that owns the land.

The shutdown affects less than 1 percent of production from the nation’s largest oil field, but so far it’s the most visible consequence of a significant legal victory for the Native family, which has battled lawyers for the federal Bureau of Indian Affairs and BP in federal court over the oil production from its land.

Federal claims court judge Nancy Firestone ruled this fall that the Oenga family is owed millions in unpaid rent because the BIA improperly allowed BP to tap three offshore oil deposits from the family’s allotment on the northern edge of the vast Prudhoe oil field.

The BIA approved BP’s expanded use of the allotment without the family’s consent, in violation of the family’s contract with BP, Firestone said in her 168-page ruling on Nov. 22.

A week ago, the BIA told BP to shut down production from Prudhoe’s Raven unit, the only one of the three disputed offshore deposits that BP was still accessing from the allotment. BP shut down Raven, which produced about 25,000 barrels of oil in November, on Friday. BP is still legally tapping the Niakuk field from the allotment.

The battle over unpaid rent and unauthorized land use involves a nondescript finger of land called Heald Point that extends into the Beaufort Sea.

The Oenga family acquired its 40-acre allotment at Heald Point decades ago for subsistence hunting. But in 1989, the family patriarch, Andrew Oenga, signed a contract with BP allowing the oil giant to use Heald Point as a right of way.

Years later, believing that BP was giving the family annual rent payments much lower than the land’s true value, eight of Oenga’s heirs — including two children, his grandchildren and great-grandchildren — sued the BIA in 2005.

The family said it had to go to court because it was unable to persuade the agency, which is in charge of collecting the family’s rent from BP, to take action on its behalf.

In an eight-day Lower 48 trial last July, the agency and the oil giant defended themselves against the Oengas’ claims. BP argued in court filings that no additional money was owed to the family. The BIA argued that the family’s claims for unpaid rent were exorbitant.

The judge ruled for the family, saying the BIA owes it roughly $5 million for the unauthorized use of the land, but she also said that BP is paying too little for the land it is authorized to use. The judge is still taking briefings on the exact amount owed but it will be far below the $200 million the Oengas originally sought.

BP Alaska spokesman Steve Rinehart said Tuesday the company is evaluating its best path forward on a potential appeal. He emphasized that Raven represented a fraction of Prudhoe’s output.

BIA’s acting director in Alaska did not return a call for comment on Tuesday.

In a written statement late week, Oenga family member Tony Delia said the family is willing to end the matter.

“Earlier this month we made BP a fair offer — pay what is owed and we will renegotiate the lease so they can use our land to produce from Raven and wherever else they want to drill. They haven’t responded,” he said.

According to a written statement from the family’s attorney, Ray Givens, the total amount owed the family is $15 million.

That figure includes the Oenga family’s calculation of how much additional money it is owed in unpaid rent for BP’s authorized use of the land, which was not part of the this lawsuit.

In her ruling, Firestone said evidence from the trial showed that BP withheld critical information about Heald Point’s strategic value for oil development when it negotiated a contract with the family to use the land.

“Clearly, (BP) did not wish to share much with the plaintiffs,” she wrote.

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

federal claims court