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February 2011

Vol. 16, No. 7 Week of February 13, 2011

Court: Native family due $4.9 million

Judgment goes against federal government, but burden could rest with BP and partners in land dispute on Alaska’s North Slope

Wesley Loy

For Petroleum News

An Alaska Native family is entitled to recover damages of more than $4.9 million for unauthorized use of its land for oil production, a federal judge has ruled.

The judgment is against the U.S. government, which the judge determined had breached its trust responsibility by allowing the improper use of the 40-acre allotment on Heald Point, near the Prudhoe Bay oil field.

The federal Bureau of Indian Affairs might now approach a group of oil companies including BP, which operates the Heald Point oil production facility, to collect the money the judge ruled the Oenga family is owed.

Shut-in wells

The Feb. 8 ruling from Judge Nancy Firestone of the U.S. Court of Federal Claims in Washington, D.C., is the latest twist in a land dispute that’s simmered for several years.

BP leased the Heald Point allotment in 1989 from Andrew Oenga, who has since died. Jutting into the Beaufort Sea just east of Prudhoe Bay, the point could support a drill site for tapping the Niakuk field just offshore.

Oenga’s heirs, however, contend BP took advantage in using the site to produce from other oil pools not covered under the lease. The family sued the federal government in 2005, arguing it breached its trust responsibility in letting BP abuse the lease and underpay rent.

The family has found considerable support from Firestone, whose prior rulings forced BP to shut-in wells tapping the Lisburne and Raven oil pools. The company says production losses from the idled wells are negligible in the context of overall Alaska North Slope production.

The Heald Point facility continues to handle Niakuk oil.

Firestone’s latest ruling focused on the amount of damages due to the Oenga family for unauthorized use of the allotment. She settled on $4,924,000 roughly based on the cost savings BP achieved by using the Oenga land as opposed to an alternative plan for producing the oil.

BP’s reaction

Lawyers for BP and other oil companies named as defendant intervenors in the Oenga family’s lawsuit against the government had argued damages should not exceed about $2.5 million.

The other working interest owners at Heald Point include ConocoPhillips, ExxonMobil, Chevron and Forest Oil.

Steve Rinehart, spokesman for BP in Anchorage, said the company is reviewing Firestone’s ruling and considering its options, including a possible appeal. Asked whether BP is trying to settle the matter with the Oenga family, Rinehart said: “I can’t speak to that.”

He noted the judgment is against the U.S. government, not the oil companies.

“We anticipate that the working interest owners may be asked to pay a share of the award, and we expect to have a discussion with the government,” Rinehart said.

Ray Givens, a Bellevue, Wash., attorney for the Oenga family, said his clients were pleased with Firestone's ruling. "They think it's a great victory," he said. "It's a good result – $5 million is not chicken feed." Givens said the family has offered to negotiate with BP.

Court papers say the family has received about $2.1 million in rental payments from BP over the past 22 years under the Heald Point lease.






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