Inupiat hunter's heirs strike blow against BP (Jan. 18, 2009)

DECISION: Court says BP's use of site to access another oil field violated its lease.

January 18, 2009 

For many years, a Native family suspected a major oil company was shortchanging them for using a strategic piece of North Slope land to pump billions of dollars worth of oil.

The company, BP, as well as the federal agency that oversees Indian land holdings, had long rejected the claims of the heirs of Andrew Oenga, an Inupiat who held the 40-acre allotment on the edge of the rich Prudhoe Bay oil field.

Recently, however, the family struck what could be a costly blow against BP.

A federal judge in September ruled BP, using a drill site on Oenga's land, had been pumping oil from a Prudhoe-area oil pool known as Lisburne in violation of its lease.

As a result of the ruling, the federal Bureau of Indian Affairs reversed its prior position and on Jan. 8 sent BP a stern letter:

"BP and its contractual partners are hereby directed to immediately cease utilizing the leased premises to produce oil or gas" from Lisburne, the letter says.

In a written reply to the BIA on Friday, BP attorney Joe Perkins said the Lisburne wells were shut down last October, after the judge's ruling, and the wells won't be restarted without a court order or the consent of Oenga's heirs.

The Oenga family and their attorney are smiling now.

They believe BP and its partner oil companies wrongfully took advantage of the lease, gradually expanding their operations on the allotment to tap lucrative pools of oil while sharing very little of the wealth.

While the family has received perhaps $1 million in rent over the years, the real payoff should have been something on the order of $80 million, according to their lawyer's calculations.

That's why the family sued the government, which should have enforced proper collections from BP, say the Oenga heirs and their attorney, Ray Givens of Bellevue, Wash.

"It's hard to go against the big guy. Usually the one with the most money wins," said Joe Delia, an Anchorage resident and Oenga's grandson.

"We just want to be treated fairly," he said, and receive payments comparable to what BP might pay Conoco Phillips or Exxon if one of those companies owned the allotment.

THE SEAL HUNTER

The Oenga land is highly strategic for BP -- and it was for Andrew Oenga too.

He was a subsistence hunter who followed the animals, Delia said.

In 1971 he applied for and received an Alaska Native homestead allotment on Heald Point, a finger of land that extends into the Beaufort Sea just east of Prudhoe Bay.

He chose that spot because it was a popular resting place for seals.

"My grandfather loved seal meat," Delia said.

In 1988, BP approached Oenga and the BIA about securing a right of way on part of Oenga's land for a road and a pipeline.

Later, however, the Oenga allotment took on much greater importance after federal regulators denied BP permission to construct an offshore island to tap its new Niakuk oil discovery, according to the federal court ruling.

BP's alternative was to build a sizeable drilling pad on the tip of Heald Point, just south of Niakuk, and sink horizontal wells to reach out for the oil.

Oenga, who needed a Native interpreter to negotiate with government and BIA representatives, signed a lease on his Heald Point land on Jan. 19, 1989. The deal provided for annual rental payments of $16,000 a year, plus a $25,000 signing bonus.

Oenga would die the following year, and interest in his allotment would be divided among several heirs according to his last will and testament.

GETTING AGGRESSIVE

The lease was revised a couple of times in the ensuing years, and Oenga's heirs pushed for and received higher rent exceeding $80,000 a year. At one point, in 1994, BP offered to buy the allotment for $600,000 cash. The family verbally accepted the offer, but the deal was never completed.

The family later took a more aggressive stand, with Delia and seven other Oenga heirs filing a lawsuit in 2006.

It was partly through the suit that they learned, in their view, that BP had taken serious advantage of them and their land.

The 30 wells on the Oenga allotment were tapping not just the Niakuk oil field, but other deposits including Lisburne, West Niakuk and Raven.

What's more, they argued that BP allowed Exxon and Conoco, then known as Arco, to trespass on Oenga land and share BP's facilities to produce oil.

WELLS SHUT DOWN

The Oenga claims are complex, and many of them remain undecided.

But on Sept. 18, Judge Nancy Firestone of the U.S. Court of Federal Claims in Washington, D.C., ruled against BP with respect at least to the Lisburne oil production.

"The court agrees with the plaintiffs that ... the scope of the lease, while broad, did not encompass oil and gas development and production from the Lisburne" field, Firestone ruled.

Lisburne accounts for only a small part of the total oil produced through BP's drill site on the Oenga family's Heald Point allotment. But family members hope they're on their way to what they see is a proper payoff.

Delia, who works in Anchorage as a building maintenance man for Arctic Slope Regional Corp., said he's not surprised that BP has shut down the wells draining the Lisburne deposit.

"That's like slowing down when you see the cop on the hill," he said.

BP spokesman Steve Rinehart said only two wells tap Lisburne from the Oenga property, and they're not especially productive.

Asked if BP took advantage of the Native family and their land, Rinehart said: "We have followed the terms of this lease."

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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