The Alberta-based federal agency managing First Nations’ oil and gas interests is suing more than 140 petroleum companies over millions of dollars in royalties that were “improperly deducted” from native bands.
Indian Oil and Gas Canada (IOGC) has filed 19 separate lawsuits on behalf of 19 First Nations in the province, against 144 oil and gas companies.
“We have a whole team of lawyers with the (federal) Department of Justice that are pursuing this for the bands,” says Strater Crowfoot, executive director of IOGC.
But the three band chiefs and a lawyer for the Stoney First Nation, about 55 kilometres west of Calgary, say the federal agency is neglecting aboriginal interests and wasting time and legal fees on the lawsuits.
IOGC has failed to use its regulatory power to compel repayment by three major oil and gas companies of at least $10 million in royalties owed to the Stoneys, said Douglas Rae, a lawyer for the tribe.
“It’s just nonsense,” Rae said. “They (IOGC) should simply tell the producers: ‘Look, pay the money or we’re going to have to cancel your oil and gas lease.’ ”
At a news conference in Calgary last week, Stoney chiefs warned that the governing tribal council might have to take that drastic step itself if the dispute isn’t resolved.
At stake is the largest natural gas production of any native reserve in Canada.
“The theory (for having IOGC) is that First Nations need to be protected from exploitation by the oil companies,” said Chief Aaron Young of the Chiniki band.
“The question we have is: ‘Who is going to protect us from exploitation by this agency of the Government of Canada?” Young added. At the core of the dispute is the number of years that oil and gas companies will have to repay First Nations for the royalty deductions, called TOPGAS and OMAC taxes.
Oil and gas companies first started deducting the taxes from native bands, despite their protests, in 1977.
In 1993, the Stoney First Nation filed a lawsuit against PanCanadian Petroleum Ltd. to recover the money. Four years later, the tribe filed claims against Shell Canada Ltd., Chevron Canada Ltd. and Imperial Oil Ltd.
In July 2000, the Alberta Court of Appeal upheld a lower court’s ruling that PanCanadian could not deduct TOPGAS and OMAC taxes from oil and gas royalties earned on Stoney land.
However, the appeal court also imposed a time restriction of six years on the Stoneys’ claim, covering the period from 1987 to 1993 (the year the band filed its lawsuit). That reduced the amount PanCanadian had to – and did – repay from $6 million to $3 million.
Crowfoot said IOGC is bound by the appeal court decision on the six-year limitation. The agency has demanded that the oil companies should repay the royalty taxes to the First Nations, but only for the period from 1987 to 1993.
But Stoney lawyer Rae argues that IOGC shouldn’t be bound by the time limitation that the court imposed on the Stoneys’ claim and should move to collect all the money owed in the other cases.
The court’s ruling “is being used as an excuse by IOGC to not collect these monies,” Rae said.
Stoney Chief Ernest Wesley, of the Wesley band, said whenever oil companies allege that they overpaid royalties to the First Nation as long as 14 years ago, IOGC simply “deducts the amount from our account and issues payment to the oil company without even talking to us about it.”
Yet when the Court of Appeal rules that oil companies have improperly deducted royalties from the First Nation, “Indian Oil and Gas tells us they can do nothing,” Wesley said.
Rae noted that the Stoneys promptly repaid Shell Canada about $1.2 million after the company claimed it had overpaid the tribe on another wellhead charge, called the Gas Cost Allowance.
“While at the same time, that same company owes millions of dollars” to the Stoneys for the other royalty tax deductions, he said. But Jan Rowley, a spokesperson for Shell, says the company has repaid, through IOGC, all the TOPGAS and OMAC royalty taxes deducted from the Stoneys, based on the terms imposed by the appeal court.
“We have paid in 2001 what we think is the right amount. Right now, we’re just waiting as IOGC and the Department of Justice review our calculations to make sure that . . . our account is up to date,” Rowley said.
IOGC’s Crowfoot said three major oil and gas companies producing resources from Stoney land have offered payments to settle the issue. All these offers, however, are based on the six-year limitation cited by the appeal court.
The overarching issue – for the Stoneys and other First Nations – is their inability under the federal Indian Act to directly control their own oil and gas reserves and other natural resources.
For example, even when the Stoneys won their case against PanCanadian, the $3-million repayment didn’t go directly to the tribe.
Under IOGC management, that repayment – along with any others that might be forthcoming – must be deposited in the Stoneys’ federally supervised account in Ottawa. The tribe then has to apply under the Indian Act to get access to its own funds.
“It’s very frustrating to be put in a position where you are obligated by legislation to have your revenues managed through that body (IOGC), but you don’t have much control over that body,” Stoney tribal administrator Heather Carnahan said.
Like most First Nations, the Stoneys could use the revenue to combat the reserve’s high unemployment rate, inadequate housing and often poor health conditions, Carnahan said.
Rae said that because of the way IOGC has handled the matter, the Stoneys also have had to spend legal fees to launch their own lawsuit against the federal government, along with separate lawsuits against individual oil and gas companies, to recover all the royalties.
