Jicarilla Gas Ruling – New Mexico Apache win natural gas appeal

By Sue Major Holmes
Albuquerque, New Mexico (AP) July 2010

An appellate court in Washington, D.C., has ruled in favor of northern New Mexico’s Jicarilla Apache Nation in a dispute over natural gas royalties dating from more than 20 years ago.

The decision could mean millions of dollars for the tribe.

The U.S. Court of Appeals for the District of Columbia ruled dueing July the U.S. Department of Interior improperly relied on regulations that went into effect after the 1984-1988 period in question.

The judges reversed part of a federal court summary judgment in favor of the department. They returned the case to that court with instructions to send it back to the agency to fix how it calculated natural gas royalties.

“We have waited long enough for our rights to be protected and now look forward to working with the Interior Department to swiftly conclude this matter,” Jicarilla President Levi Pesata said in a news release.

The judges said the tribe “likely will receive additional revenue” if Interior reverses course on computing royalties.

Attorney Steven Gordon of Washington, D.C., who represented the tribe in the appeal, said it’s his understanding the royalties plus interest would total about $6 million.

The Associated Press left a message seeking comment from a Department of Justice attorney who represented the government.

The Jicarilla tribe, with more than 4,000 members, is a large natural gas producer and receives royalty payments for leases for production on its 1 million acres of trust land.

Companies pay royalties equal to either one-eighth or one-sixth of the value of the gas.

The problem arose in certain gas sales that did not reflect market value. To ensure full royalty payments in those cases, the leases included a provision on how to calculate the value of the gas.

The Minerals Management Service and the Bureau of Indian Affairs, which jointly managed Jicarilla leases, had regulations for computing value. However, a key term in those calculations was not defined until the minerals agency revised the regulations in March 1988.

A few years later, the minerals service and the tribe devised a new way to calculate the term, which the agency used to figure prices on Jicarilla leases from 1984 through June 1995.

It then issued 39 orders directing companies to pay additional royalties for the period.

Several companies appealed. The Department of Interior denied the appeals in 2000, concluding the price was properly calculated and the method was consistent with the 1988 regulations.

Then in 2007, the department overruled an order for other companies to pay additional royalties to the Jicarillas. In that case, Interior ruled the same method for calculating price was not consistent with the 1988 regulations.

The Jicarillas challenged the decision, but the federal district court rejected the tribe’s arguments and issued a summary judgment in favor of the department.

The appellate judges ruled the court failed to address the Jicarillas’ contention the decision could not apply to the period before February 1988 because the regulations weren’t in effect. The judges also said the Interior Department departed from its own precedent without explanation.