Topic: Money

FACTS AND PROCEEDINGS BELOW

Appellees Doyon, Ltd. and Bering Straits Native Corporations, together with the eleven corporate appellants,[1] constitute the Alaska Native Regional Corporations (Regional Corporations) created pursuant to the Alaska Native Claims Settlement Act, 43 U.S.C. §§ 1601 et seq. (ANCSA). Corporate appellants and the Secretaries of the Interior and the Treasury[2] appeal from a district court Memorandum and Order granting summary judgment in favor of appellees. We reverse.

ANCSA’s primary purpose is to provide a “fair and just settlement of all claims by Natives and Native groups of Alaska, based on aboriginal land claims.” 43 U.S.C. § 1601(a). Accordingly, each of the twelve regions has been subdivided into villages, and the Alaska Native Village Corporations (Village Corporations) have been established. 43 U.S.C. § 1607.

To effectuate the legislative plan, an Alaska Native Fund (Fund) has been created, into which $962,500,000 will ultimately be deposited for distribution to the Regional Corporations. 43 U.S.C. § 1605. The fund is to be parceled out in quarterly installments to the Regional Corporations according to the “relative numbers of Natives enrolled in each region.” 43 U.S.C. § 1605(c).

In lieu of sharing in Fund distribution, 43 U.S.C. § 1618(b) gave Native villages situated on reserve lands[3] the option to acquire title to the surface and subsurface land in fee. Doyon Region villages of Tetlin, Venetie, and Arctic Village, and Bering Straits Region villages of Elim, Gambell, and Savoonga elected to acquire title to their reserves in this manner. As fee owners they do not have to share the revenues derived from their land with their respective Regional Corporations. On the other hand, these villages are not entitled to receive stock in the Regional Corporations and accordingly, forfeit the right to receive distributions from the Fund.[4]

In December 1973 the Secretary of the Interior (Secretary) completed and certified enrollment of Natives in Regional and Village Corporations. Enrollment of all Natives was required before the reserve land election could take place, but only those Natives not making the land election became shareholders of their respective regions. Distribution from the Fund based on numbers of Natives enrolled and holding stock in each region began. 43 U.S.C. § 1605(c).[5] The Secretary excluded Natives living in landed villages in calculating the distributive shares for Doyon and Bering Strait Regions.

Doyon and Bering Straits protested the exclusion and initiated suit. The United States District Court for the District of Alaska held that Natives with title to fee land were includable for calculations of distributive shares from the Fund.[6] Aleut Corp. v. Arctic Slope Regional Corp., 417 F. Supp. 900, 904-06 (D.Alaska 1976).

The sole issue on appeal is whether Native members of villages which elected to take title to reserve lands in lieu of all other benefits under the Act may be counted by the Regional Corporations for purposes of calculating their proportional shares of the Fund.[7] We hold they cannot for the following reasons.

We conclude that: (1) the term “Native” in certain portions of the Act was intended to refer to stockholders of the Regional Corporations, and that legislative history demonstrates that only stockholders were intended to be counted in calculating distributive shares for each Regional Corporation; (2) appellants’ argument for equality of benefits is viable in absence of evidence that Doyon and Bering Straits need a greater per-shareholder amount in order to provide services to villages holding land in fee; and (3) this Court will give great deference to the interpretation of the Secretary, the federal official with responsibility for administering the Act.

CONSTRUCTION OF § 1605(c)

Title 43 U.S.C. § 1605(c) provides:

After completion of the roll prepared pursuant to section 1604 of this title, all money in the Fund, . . . shall be distributed . . . on the basis of the relative numbers of Natives enrolled in each region. (emphasis added)

Based on this language, according to the district court, Natives who are not stockholders are to be included to determine the distributive share for Doyon and Bering Straits even though they may not participate in the distribution. We disagree.

Formerly, statutory construction in this Circuit was dominated by the “plain meaning rule” which precluded the use of extrinsic evidence to determine the meaning of a statute, the language of which seemed clear on its face. See I.T.T. Corp. v. G.T. & E. Corp., 518 F.2d 913, 917-18 (9th Cir. 1975); Easson v. C.I.R., 294 F.2d 653, 656 (9th Cir. 1961). But see Greyhound Corp. v. United States, 495 F.2d 863, 868 (9th Cir. 1974). However, in light of a recent Supreme Court case, the viability of that rule is questionable, and it appears that

when aid to construction of the meaning of words, as used in the statute, is available, there certainly can be no ‘rule of law’ which forbids its use, however clear the words may appear on ‘superficial examination.’

Train v. Colorado Pub. Interest Research Group, Inc., 426 U.S. 1, 10, 96 S. Ct. 1938, 1942, 48 L. Ed. 2d 434 (1975) (footnotes omitted), citing United States v. American Trucking Ass’ns, 310 U.S. 534, 543-44, 60 S. Ct. 1059, 84 L. Ed. 1345 (1940). We find that under the more flexible Supreme Court approach the present circumstances require exploration of extrinsic evidence because “Natives enrolled in each region” is susceptible to two different interpretations.

Relevant legislative history leads us to conclude that Congress intended the regions to share as nearly as possible on an equal basis, and did not intend to sanction disparate distribution of the Fund based on unforeseen semantic problems.[8] For example, the House Committee on Interior and Insular Affairs reporting on an earlier version of the Act, which contained the same operative language – “Natives enrolled in each region” – discussed the distribution of resource revenues:

In order that all Natives may benefit equally from any minerals discovered within a particular region, each corporation must share its mineral revenues with the other 11 corporations on the basis of the relative numbers of stockholders in each region.

H.Rep. 92-523, 92d Cong., 1st Sess. 6, reprinted in [1971] U.S.Code Cong. & Admin.News pp. 2192, 2196 (emphasis added).

 Secondly, appellants argue and we agree that the entire scheme of the Act treats all eligible Natives on an equal basis with respect to the monetary portions of the settlement, and that this may only be accomplished by excluding landed Natives in calculating distributive shares.

A report by the Senate Committee on Interior and Insular Affairs, discussing the settlement bill which initially passed the Senate, S. 35, 92d Cong., 1st Sess. (1971), stated:

The settlement is statewide and applies to all Alaska Native groups; all eligible Natives regardless of their ethnic affiliation or their location are entitled to an equal share in assets provided as compensation for claims extinguished in the settlement.

S.Rep. 92-405, 92d Cong., 1st Sess. 79 (1971) (emphasis added).

While a literal reading of § 1605(c) authorizes Natives who are not stockholders to be included in the calculations defining distribution shares for Doyon and Bering Straits, such construction is inconsistent with Congress’ expressed desire for equality.[9] We therefore hold that only stockholders are to be counted in calculating distributive shares for each Regional Corporation.

JOINT REGIONAL AND VILLAGE CORPORATION VENTURES

Two sections of the Act allude to joint ventures between Regional and Village Corporations. Doyon and Bering Straits maintain that such joint ventures cannot be successfully carried out by them unless they receive a greater per-shareholder distribution than regions without landed villages. Title 43 U.S.C. § 1606(l) provides:

Funds distributed to a Village Corporation may be withheld until the village has submitted a plan for the use of the money that is satisfactory to the Regional Corporation. The Regional Corporation may require a village plan to provide for joint ventures with other villages, and for joint financing of projects undertaken by the Regional Corporation that will benefit the region generally. In the event of disagreement over the provisions of the plan, the issues in disagreement shall be submitted to arbitration, as shall be provided for in the articles of incorporation of the Regional Corporation.

Title 43 U.S.C. § 1606(m) provides:

When funds are distributed among Village Corporations in a region, an amount computed as follows shall be distributed as dividends to the class of stockholders who are not residents of those villages: The amount distributed as dividends shall bear the same ratio to the amount distributed among the Village Corporations that the number of shares of stock registered on the books of the Regional Corporation in the names of nonresidents of villages bears to the number of shares of stock registered in the names of village residents: Provided, That an equitable portion of the amount distributed as dividends may be withheld and combined with Village Corporation funds to finance projects that will benefit the region generally.

These two sections require the Regional Corporations to be active participants in the development of their regions and not merely conduits for Fund distributions.

It appears, however, that Congress intended the joint ventures alluded to to benefit only the stockholders of the region – notwithstanding the language “projects that will benefit the region generally.” Neither 43 U.S.C. § 1606(l) nor § 1606(m) seems applicable to the villages holding fee land since the Regional Corporation has no authority to control activities in those villages and the Natives are not entitled to receive distributions from the Fund or stock. Moreover, we can discern nothing in the Act or its history indicating that the Regional Corporations of Doyon or Bering Straits have any obligations or duties to those villages. On this basis we reject appellees’ contention that they require a greater per-shareholder amount in order to provide services to the landed villages within their regions.

DEFERENCE TO THE SECRETARY’S INTERPRETATION

After the Secretary initiated the distribution of the Fund, Doyon wrote him concerning a “serious error” made in calculating its share – the failure to count all Natives enrolled in the region. The Department denied Doyon’s request for adjustment, stating: 

Although Section 6(c) [43 U.S.C. § 1605(c)] provided for distributions of the . . . Fund . . . “on the basis of the relative numbers of Natives enrolled in each region” . . . we do not believe that the Congress could have intended to include for such purposes those individuals rendered ineligible . . . to participate in the redistributions. . . . Such an application . . . would result in a substantial and unjustified disparity of benefits among the stockholders of the various regional corporations which cannot be rationally supported. (emphasis added.)

The Secretary's decision was supported by a comprehensive memorandum stating that inclusion of landed Natives would result in a "windfall" for Doyon and Bering Straits.

The principal responsibility for administering the Act lies with the Secretary and his interpretations of the statute are entitled to “great weight” upon judicial review. Hamilton v. Butz, 520 F.2d 709, 714 & n. 9 (9th Cir. 1975); Udall v. Tallman, 380 U.S. 1, 16, 85 S. Ct. 792, 13 L. Ed. 2d 616 (1964). In Tallman the Supreme Court stated:

When faced with a problem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration. “To sustain the Commission’s application of this statutory term, we need not find that its construction is the only reasonable one, or even that it is the result we would have reached had the question arisen in the first instance in judicial proceedings.” [citations omitted]. “Particularly is this respect due when the administrative practice at stake ‘involves a contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new.'” [citation omitted]

380 U.S. at 16, 85 S. Ct. at 801 (emphasis added). See also Patagonia Corp. v. Board of Governors of Federal Reserve System, 517 F.2d 803, 812 (9th Cir. 1975); California ex rel. Dep’t of Transp. v. United States ex rel. Dep’t of Transp., Fed. Highway Administration, 547 F.2d 1388, 1390-91 (9th Cir. 1977).

Additionally, Doyon and Bering Straits allege that “to date the Secretary has evidenced no particular expertise” in the construction of the Act, and that the courts have “repeatedly rejected his interpretation and administration of the Claims Act.” The Secretary’s “track record” with respect to the administration and interpretation of the Act has no bearing on the weight to which his interpretations are entitled upon judicial review. The district court erred in failing to give the Secretary’s interpretation of the term “Natives enrolled” the “great weight” or “great deference” to which it was entitled. Hamilton v. Butz, supra; Udall v. Tallman, supra. We find appellees’ criticisms of other interpretations of the Act by the Secretary to be irrelevant to this review.

For the above reasons we hold that the district court’s Memorandum and Order granting summary judgment in favor of appellees should be reversed, and that the Secretary’s method of computation of the distributive shares for each region of the Fund should be continued.[10]

REVERSED

Dissent by: ANDERSON

Dissent

J. BLAINE ANDERSON, Circuit Judge, dissenting:

Surely, the field of statutory construction so often confronted by justices and judges in the federal judicial system is one of the most prolific sources of differences of opinion in a system where differences of opinion are endemic.[1] I respectfully dissent and add some support to this assertion.

For the reasons stated by the district judge, I would affirm (417 F. Supp. 900), but add thereto some further analysis and observations.

The district judge paid “some deference” to the Secretary’s decision. He was required to do no more. Great deference to the Secretary’s decision is usually required only where there has been a consistent construction by an administrative agency over a period of time, and within his expertise and power. That is not this case. The Secretary has no power or authority to “alter provisions that are clear and explicit – – -.” He has no authority to avoid the direct “shall distribute” command of 43 U.S.C. § 1605(c). Louisville & Nashville R. Co. v. United States, 282 U.S. 740, 759, 51 S. Ct. 297, 75 L. Ed. 672 (1931); Swain v. Brinegar, 517 F.2d 766, 777 n. 14 (7th Cir. 1975); Patagonia Corp. v. Board of Governors of Fed. Reserve System, 517 F.2d 803, 812 (9th Cir. 1975). We have already declined to afford deference to the Secretary’s attempt under ANSCA to establish a cut-off date for arbitration of land claims under 43 U.S.C. § 1606(a). Central Council of Tlingit, et al. v. Chugach Native Ass’n., 502 F.2d 1323, 1325 (9th Cir. 1974). There, as here, the language of Congress was an explicit command. The Secretary’s decision here is new and has the appearance of being a “one-shot” conclusive determination on all future fund distributions which fly in the face of a direct Congressional command.

In my view there is no “fair contest between two readings” of the statute in question. “A problem in statutory construction can seriously bother courts only when there is a contest between probabilities of meaning.”[2] (emphasis added) As I read the majority opinion, we have no such contest. We agree as to the meaning of “stockholder” and “Natives enrolled” wherever they appear in ANSCA. We also seem to agree in their logical placement in the various sections of the Act, save one.

The majority opinion, it seems to me, sets a bad potential precedent in appearing to sanction an executive departmental decision to “gerrymander” what are statutory words of clear and unambiguous meaning in order to effectuate the executive viewpoint of an equitable remedy rather than the legislative directive of remedy.

This is not a case of interpreting ambiguous wording in a vague statute. Nor can it be said that using the words in their statutory context leads to an absurd result.[3] In my opinion, even the most fair-minded person could not say with comfortable assurance that distribution under § 6(c) based on the measure of “Natives enrolled” leads to an uncontemplated inequitable result nor thwarts legislative purpose. The statutory words have a clear, definite, statutorily-defined meaning. Were the statutory structure and its policy and purpose vague[4] and its words ambiguous there could be no quarrel with the majority’s approach. It would be permissible judicial interpretation thrust upon the court (either intentionally or negligently) by the Congress. Here the word “stockholder” and the phrase “Natives enrolled” both have clearly ascertainable meanings drawn from the Act itself and they make logical and cohesive sense in their usage in the various sections of the Act. Only when applied to a precise factual distribution of funds does the statute excite in some a feeling of inequity. This administratively perceived inequity then is transformed into statutory ambiguity and vagueness justifying the transposition of words having completely separate and distinct meanings into a new location within the statutory framework to achieve the administrator’s perception of equity (i.e., “stockholder” to § 6(c) in place of “Natives enrolled”). Based on this logic, the Secretary assumes that Congress and its committees must have made a “mistake.” However, the legislative history and records demonstrate beyond any realistic doubt that the language in question was knowingly and deliberately used by the Congress in constructing this legislation to deal with a pressing and complex problem. In addition, the Secretary and his aides participated extensively in assisting the Congress in its formulation of ANSCA. Substituting different words or phrases for otherwise clear ones is not statutory construction of vague or ambiguous language (the proper role of the judiciary in interpreting and construing statutes). Rather, it is purely and simply administrative and judicial “legislating” undertaken to correct a perceived Congressional “mistake” when there is no evidence to support the theory that there has, in fact, been a mistake made. Moreover, neither the Secretary, counsel for appellants, nor the majority cite any authority that the Secretary or this court is empowered to correct an alleged Congressional mistake in this context. “An omission at the time of enactment, whether careless or calculated, cannot be judicially supplied, however much later wisdom may recommend the inclusion.” Frankfurter, Some Reflections, etc., supra, p. 534.[5]

The Congress, in this situation, is presumed to have known very well the scheme it constructed. It explicitly provided that a fund was to be distributed in accordance with the language and formula it set forth. It seems to me to be apparent that some potential for disparity in distribution must have been present in the minds of the Congressional constructors (here the disparity is only.016 of the total fund) and that here, as judges, we are not, therefore, confronted with the question of what the Congress would have intended had it been presented with the problem. The disparity is miniscule and we should not reconstruct the statutory distribution under some guise of judicial interpretation in order to subserve some evanescent Congressional intention or to promote some perceived but wholly obscure and mathematically unachievable social value or policy.

Although this statutory scheme has been amended several times since its adoption on December 18, 1971, the Congress has not corrected this alleged mistake. In spite of the apparent ease of amendment and the required annual reports, infra, there is no evidence in this case that the Secretary or the appellant Regional Corporations have presented their theory of mistake and inequity to Congress. Future Congressional appropriations will be made to fund the periodic distributions to the Regional Corporations. Sec. 6, 43 U.S.C. § 1605. By Congressional mandate the Secretary is required to submit to the Congress annual reports on the implementation of ANSCA (Sec. 23, 43 U.S.C. § 1622) until 1984 with a final report in 1985 “with such recommendations as may be appropriate.” It may be argued with some force that the Congress intended to reserve to itself the right and power to remedy real or imagined deficiencies or inequities. If in fact a mistake has been made or a substantial unintended inequity exists, Congress has ample time to correct it if it wishes to do so. In conclusion, I would affirm the district court and send the Secretary and appellants to the Congressional committee rooms to seek relief rather than to risk disruption of the comprehensive whole by a judicial transplant.[6]

THIS CAUSE comes before the court on the motion of the Steering Committee[1] for partial summary judgment on the applicability of section 7(i) of the Alaska Native Claims Settlement Act (ANCSA), 43 U.S.C. § 1606(i) (1976), to over $ 13,000,000 in revenues received by the Arctic Slope Regional Corporation (hereinafter Arctic Slope) under agreements with five major oil companies.

As a part of the settlement of the aboriginal claims of Alaska’s Natives, Congress required that a regional corporation, authorized by ANCSA, receiving revenues from certain sources of wealth share those revenues with its sister corporations. Section 7(i) provides:

Seventy per centum of all revenues received by each Regional Corporation from the timber resources and subsurface estate patented to it pursuant to this chapter shall be divided annually by the Regional Corporation among all twelve Regional Corporations organized pursuant to this section according to the number of Natives enrolled in each region pursuant to section 1604 of this title. The provisions of this subsection shall not apply to the thirteenth Regional Corporation if organized pursuant to subsection (c) hereof.

§§ 7(i), ANCSA, 43 U.S.C. § 1606(i) (1976) (hereinafter referred to as section 7(i)). The almost deceptive simplicity of this section has caused this litigation which is now at the end of its fifth year.[2]

In conformity with ANCSA, Arctic Slope has received interim conveyances to the subsurface estate of approximately 3,785,200 acres of land located on the North Slope of Alaska. Beginning in 1973, Arctic Slope entered into four agreements with five oil companies.[3] Under these agreements Arctic Slope received approximately $ 30 million. In return the oil companies received ultimately the right to extract oil and gas from the subsurface estate conveyed to Arctic Slope. Arctic Slope contends that $ 13,911,057 of the revenues received under these agreements are not subsurface revenues within the meaning of section 7(i) and therefore do not have to be shared with the other regional corporations. Arctic Slope contends that these revenues were not paid for oil and gas but were consideration for a variety of other services and property interests independent of the subsurface estate. The Steering Committee, however, maintains that as a matter of law the revenues received under these agreements are revenues attributable to the subsurface estate and that the allocations by Arctic Slope to other services and property interests are mere “labels” that do not represent valid separate consideration in the context of these agreements.

Material Facts

Arctic Slope argues that this decision is not ripe for summary judgment because many facts exist that are disputed. The court has carefully reviewed the agreements, depositions, affidavits and the entire record relevant to this motion and agrees with the moving parties that while there are numerous facts that are in dispute, those facts are not material to this motion.

It is not every uncertainty or dispute or every failure of the parties to agree, which precludes the disposition of a case by summary judgment. Where the determinative facts are without dispute or are clearly established by the record so that one of the parties is shown to be entitled to judgment as a matter of law, it is the duty of the Court to grant summary judgment accordingly; this notwithstanding that there may be a dispute as to immaterial points.

Burton v. United States, 139 F. Supp. 121, 124 (D.Utah 1956). Accord: Ashcroft v. Paper Mate Mfg. Co., 434 F.2d 910 (9th Cir. 1970); Proler Steel Corp. v. Luria Bros. & Co., 417 F.2d 272 (9th Cir. 1969).

The court finds no genuine issue as to three material facts which determine whether these revenues are covered by the sharing provisions of section 7(i).[4] Those facts are:

1. No matter how each agreement was structured and no matter how the payments were allocated by the language of the agreement, the ultimate object, or as the Steering Committee urges, “the bottom line”, of all the agreements was to give the oil companies the right to explore for and develop oil and gas resources on Arctic Slope land conveyed under ANCSA.

2. The oil company negotiators considered each agreement as a single contract package with the object being the exploration for and development of oil and gas.  Arctic Slope does not contend, nor could it, that the oil companies would have been interested in these contracts if they had not included the right to explore for and develop oil and gas.

3. At the beginning of each negotiation the oil companies offered a cash bonus for a contract that would grant the right to explore for and develop oil and gas. At the conclusion of the negotiations the same amount of money was paid for a contract that recited that the cash was not a bonus for oil and gas and allocated the payments to other elements of consideration. As the Steering Committee states, “Only the labels changed, not the dollars.”

General Principles

This court has previously interpreted section 7(i) broadly so as to further the section’s “obvious egalitarian purpose.” Aleut v. Arctic Slope Regional Corp., 410 F. Supp. 1196, 1200 (D.Alaska 1976). Accord: Chugach Natives, Inc. v. Doyon, Ltd., 588 F.2d 723, 732 (9th Cir. 1978) (Section 7(i) was intended to achieve rough equality in assets among all the Natives). This court also has recognized that it must avoid interpretations which “would encourage the resource controlling corporation to devise all sorts of contractual schemes for maximizing its present revenues at the expense of its sister corporations.” 410 F. Supp. at 1200. This court has previously ruled that “the sharing requirements of section 7(i) do not depend on whether a subsurface resource actually is discovered, produced, or marketed.” 417 F. Supp. 900, 903 (D.Alaska 1976). In that same opinion the court stated that the test to be applied in determining whether benefits paid to third parties were revenues subject to the sharing requirements of section 7(i) was whether the benefits were “generated because of, and in exchange for, the acquisition of an interest in the timber resources and subsurface estate received by a regional corporation, pursuant to ANCSA.” 417 F. Supp. at 903. Because the contracting region has control over the types of contracts that it will enter into, it was also held that the contracting region should have the burden of proving in kind or indirect benefits were not received in exchange for or because of the granting of an interest in timber resources or subsurface estate. 417 Supp. at 904.

In applying these general principles to the revenues received under the agreements before the court, it is necessary to develop additional specific rules for determining what revenues received by a regional corporation must be shared with the other regional corporations. These rules will further the important purpose of section 7(i) and aid in assuring that the resource wealth of Alaska’s Native corporations will be distributed so as to benefit all of Alaska’s Native peoples. In order to accomplish this general egalitarian purpose, the rules adopted are intended to reduce the opportunity and thereby the incentive for resource-controlling regional corporations to devise methods for retaining revenues that were intended by Congress to be shared by all the regional corporations. The purpose of these rules is to reduce the need for future litigation by providing guidance to the regional corporations.[5]

First, revenues received by a regional corporation that are attributable to, directly related to, or generated by the acquisition of an interest in the corporation’s subsurface estate are revenues subject to the sharing provisions of section 7(i).[6]

Second, revenues received under an agreement, or a group of agreements that are regarded as one transaction, which has as its ultimate object the acquisition of an interest in the subsurface estate will be presumed to be attributable to, directly related to, and generated by the acquisition of an interest in the corporation’s subsurface estate. The contracting corporation has the burden to rebut this presumption. It can do so by proving by a preponderance of the evidence that the revenues received by it under such an agreement are for elements of consideration that are owned by the corporation, that the consideration has actual value, and that this value is not attributable to, directly related to, nor generated by the acquisition of an interest in the corporation’s subsurface estate.

This rebuttable presumption and the shift in burden which it causes is justified because the contracting corporation has control over the types of contracts into which it enters. It is improbable that the revenues received under an agreement granting an interest in the subsurface estate are not attributable to the subsurface estate. “The risk of failure of proof may be placed upon the party who contends that the more unusual event has occurred.” McCormick on Evidence § 337 (1972) at 787. This shift in burden is also necessary to enforce the egalitarian purpose behind section 7(i) because the contracting corporation has strong financial incentives to obscure the true nature of the transaction.

Third, the allocation of revenues to a particular element of consideration by the parties to an agreement does not determine whether the revenues received by the regional corporation are subject to sharing under section 7(i). The court must examine the claimed elements of consideration to determine whether they have substance. However, any allocations not made clear on the face of the contract will not be considered by the court. The contracting corporation must be held to the contract that it made and cannot be allowed to proffer to the court numerous after the fact explanations as to why the revenues were received. By insisting that reasonable allocations be made clear in the contract, the court can simplify future litigation over the distribution of section 7(i) revenues. Failure to allocate will eliminate after the fact rationalizations, but a label in the contract will not prevent the court from piercing transparent schemes to retain revenues that are attributable to the subsurface estate.

The presumption that the revenues received under these agreements are section 7(i) revenues applies to these agreements. There is no genuine issue of material fact that these agreements convey to the oil companies an ultimate right to acquire an interest in the subsurface estate of lands received by Arctic Slope from the federal government. The court must now examine the claimed elements of consideration to determine whether they have substance.

Compensation for Damage to the Surface Resources and the Subsistence Lifestyle of Arctic Slope Natives

Arctic Slope has made several related arguments contending that a portion of these contested revenues are compensation for damages to surface resources that will be caused by oil and gas exploration and development activities. Arctic Slope claims that revenues were received from the oil companies for 1) reasonable damages to the surface, 2) liquidated damages for unreasonable damage to the surface, and 3) compensation for indirect damage to the subsistence life-style and culture of Arctic Slope shareholders.

An oil and gas lease carries with it the right to use as much of the surface as may be reasonably necessary to exploit the oil and gas. See generally, W. L. Summers, Oil and Gas § 652 and cases cited therein. Any revenues received for reasonable damage to the surface are attributable to, directly related to, and generated by the acquisition of an interest in the subsurface estate.

Arctic Slope contends that at least a portion of these revenues are liquidated damages for unreasonable damage to the surface resources. The court agrees with Arctic Slope that revenues received under a valid liquidated damage clause for unreasonable damage to the surface would not be revenues attributable to the subsurface estate. The surface of Arctic Slope land has real value that could easily be shown not to be attributable to oil and gas development or any other subsurface interest. However, this argument has no relevance to the agreements before the court.

None of the agreements contain a clause which even resembles a liquidated damages clause. Nor is there a provision which waives any right of Arctic Slope to recover for damage to the surface. On the contrary, the leases that would be acquired under these agreements provide that:

Lessee shall pay for damages caused by Lessee’s operations to their existing improvements and any trees or vegetation, and also to gravesites and historical sites of which Lessee has been advised in writing by Lessor. . . .

Chevron Oil and Gas Lease, p. 15, P 10; Union/Amoco Oil and Gas Lease p. 16, P 10; Texaco Oil and Gas Lease p. 16, P 10; Shell Oil and Gas Lease p. 23, P X. These agreements are highly technical integrated contracts drawn by skilled attorneys. A reasonable person simply could not believe that such an allegedly important element of consideration would not be stated in the agreements in a manner to leave no doubt about its existence. In addition, the oil companies would not have paid a substantial amount as liquidated damages for unreasonable damage to the surface without receiving in return a waiver of liability for such damages, at least in the amount paid as liquidated damages. But as noted above, no provisions of this kind can be found in the agreements.

This leads the court to the inescapable conclusion that this argument is an after the fact rationalization and that Arctic Slope could not have received any portion of these revenues as liquidated damages for unreasonable damage to the surface estate. This claim by Arctic Slope can be rejected on the ground that the allocation of revenues to this element of consideration is foreclosed by the face of the agreements.

Each of the agreements contains references to the subsistence life-style of Arctic Slope shareholders such as that which appears in the lease option agreement with Standard Oil of California:

Such initial Cash Option Payment and such Additional Cash Option Payment, collectively, are intended and shall be treated and considered as consideration for granting of this option agreement to Standard and to induce ASRC to grant this option agreement in the light of the possible changes and effect which operations by Standard under leases granted hereunder may produce in the historical life style, occupational patterns and general characteristics of the community life of the Native shareholders of ASRC, and shall not be treated or considered as bonus consideration for any oil and gas lease which Standard may elect to obtain from ASRC covering any ASRC lands or as rental for any period under any such oil and gas lease.

Exhibit B, Lease Option Agreement at 2 (Standard Oil of California); See also Exhibit C, Exploratory and Development Agreement at 3 (Union Oil/Amoco); Exhibit D, Exploratory and Development Agreement at 3 (Texaco); Exhibit E, Exploratory and Development Agreement at 8 (Shell).

As the court previously has stated, the allocation of these revenues to a particular element of consideration, or the labels placed upon the consideration by the parties to the agreement, do not control the determination of whether these revenues are subject to section 7(i) sharing. The court must examine the allocations made by the contracting parties to determine whether they have substance.

The Arctic Slope Regional Corporation is a for-profit corporation organized under Alaska law. 43 U.S.C. § 1606(d). Assuming without deciding that the Native shareholders would have a claim against the oil companies for damage to their subsistence life-style and culture, these interests are not held by the regional corporation. It is hornbook law that corporations are legal persons distinct from their shareholders.[7] While the extent to which Native corporations differ from any other corporation organized under Alaska law has not been definitely decided,[8] this court does not accept the proposition that the interests of individual shareholders are the same as the interests of the corporation. Arctic Slope’s contention that the corporation could receive compensation for damage to the subsistence and cultural interests of its individual shareholders necessarily implies that the corporation has the power to waive claims for such damages. Arctic Slope has not indicated the source of such authority.

It is true that Arctic Slope’s articles of incorporation state that one of its purposes is to “engage in all activities, whether economic, cultural, social or charitable, to protect and preserve the well-being of the Natives of the Arctic Slope Region.” Art. III, § 3. It could be that a Native regional corporation has a special obligation, above and beyond its profit-making mission, to insure that its activities do not destroy or damage the culture and subsistence life-style of the people of the region. That question is not decided here. However, Arctic Slope’s argument that it must protect the subsistence resources of its region and the culture of its people confuses fiduciary obligations with the acquisition of a compensable interest in such resources and culture. In summary, whether the court analyzes Arctic Slope’s contentions concerning damage to the environment as compensation for reasonable surface damage, liquidated damages for unreasonable surface damage, or compensation for damage to subsistence and culture, the elements of consideration claimed by Arctic Slope are inadequate as a matter of law.

Services and Alleged Surface Interests Related to Oil and Gas Exploration and Development

Arctic Slope claims a portion of these revenues were for services and alleged surface interests. It contends that the oil companies paid for 1) assistance in obtaining permission from the Secretary of Interior to enter upon lands withdrawn for Native corporation selection, 2) consent by Arctic Slope to explore lands withdrawn for Native selection, 3) assistance in obtaining village consent to enter village lands, and 4) surface rentals for easements on Arctic Slope lands necessary to carry out the purposes of any leases acquired by the oil companies.

Each of these alleged elements of consideration was a part of the total package the oil companies purchased in order to gain the effective right to explore for and develop oil and gas. The oil companies would not have made payments to Arctic Slope for these services and surface rights unless they acquired in the same agreement, or group of agreements, the right to acquire oil and gas. Arctic Slope cannot seriously contend that it could sell oil and gas leases for millions of dollars and then deny permission to the lessees to go on the surface to explore for and develop that oil and gas. Whatever independent value these alleged elements of consideration have, Arctic Slope has brought forth no evidence that would illustrate that the revenues received for these services and other interests were not attributable to, directly related to, nor generated by acquisition of an interest in the subsurface estate.

Lease Options

In an appendix the court has reprinted Arctic Slope’s “lease option.” These so-called “lease options”, which were a part of all four agreements, constitute one of the best examples of the type of legal device to which the court alluded when it referred to “contractual schemes for maximizing its present revenues at the expense of its sister corporations.” Aleut Corp. v. Arctic Slope Regional Corp., 410 F. Supp. 1196, 1200 (D.Alaska 1976).[9]

For example, close examination of the “lease option” in the Standard Oil of California agreement shows that Standard is obligated to pay an initial payment of $ 1.5 million. Thirty days after notice that Arctic Slope has received conveyance of 1.5 million acres of land, Standard must pay an additional one million dollars. This additional cash payment “shall be due and payable in cash from Standard to ASRC on the date specified above regardless of whether Standard has theretofore exercised its option under this agreement to obtain any oil and gas lease on any ASRC lands.” (emphasis added). By this language Standard is obligated to pay the entire amount whether it exercises its “option” or not. Therefore the face of this so-called “option” establishes it not to be a true option at all, but a sale of the right to acquire oil and gas. Revenues received for these “lease options” are revenues received from the subsurface estate as a matter of law.

Joint Acquisition Agreement

The Standard Oil of California Agreement contains a unique provision that does not require extended comment. The agreement states that Standard Oil of California paid $ 1.5 million for Arctic Slope’s entry into an agreement that if either corporation acquired an oil and gas lease on certain lands not conveyed under ANCSA, the other party would be offered an interest in the lease on the basis of 80% for Standard Oil of California and 20% for Arctic Slope, with the oil company to bear all exploration and development costs. The benefits under this agreement flow from Standard Oil of California to Arctic Slope. The Steering Committee contends that the oil company would not have paid $ 1.5 million for the right to spend additional sums to benefit Arctic Slope. The court finds merit in this argument.

The court having examined the briefs, depositions, affidavits and exhibits, finds that there are no genuine issues of material fact, and the revenues received under these four agreements are revenues received from the subsurface estate as a matter of law and are subject to the sharing provisions of section 7(i) of ANCSA.

Accordingly IT IS ORDERED:

THAT the motion of the Steering Committee for partial summary judgment is granted.

APPENDIX

LEASE OPTION IN EXPLORATORY AND JOINT ACQUISITION AGREEMENT BETWEEN STANDARD OIL OF CALIFORNIA AND ARCTIC SLOPE REGIONAL CORPORATION, STEERING COMMITTEE’S EXHIBIT A

WHEREAS Standard desires a first and prior right and option to acquire oil and gas leases on some of the withdrawn lands which are selected and become ASRC lands and ASRC is willing to grant such first and prior right and option upon the terms and conditions contained in this agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties do hereby agree as follows:

1. GRANT OF OPTION

For and in consideration of One Million Five Hundred Thousand Dollars ($ 1,500,000.00) (the “Initial Cash Option Payment”) which is being paid in cash by Standard to ASRC incident to execution and delivery of this Lease Option Agreement and the additional sum of One Million Dollars ($ 1,000,000.00) (the “Additional Cash Option Payment”) to be paid in cash hereafter by Standard to ASRC as hereinafter provided, and subject to and in accordance with all of the terms, conditions, exceptions and provisions of this agreement ASRC hereby grants to Standard a first and prior right and option to acquire oil and gas leases on up to 2,000,000 acres of ASRC lands. The Additional Cash Option Payment shall be paid by Standard to ASRC within thirty (30) days after Standard receives notice in writing from ASRC that ASRC has received a “conveyance of title” (as hereinafter defined) for an aggregate of at least 1,500,000 acres of ASRC lands (exclusive of lands depicted in pink in Exhibits “A” and “B” hereto). Such Initial Cash Option Payment and such Additional Cash Option Payment, collectively, are intended and shall be treated and considered as consideration for granting of this option agreement to Standard and to induce ASRC to grant this option agreement in the light of the possible changes and effect which operations by Standard under leases granted hereunder may produce in the historical life style, occupational patterns and general characteristics of the community life of the Native shareholders of ASRC, and shall not be treated or considered as bonus consideration for any oil and gas lease which Standard may elect to obtain from ASRC covering any ASRC lands or as rental for any period under any such oil and gas lease. Said Additional Cash Option Payment shall be due and payable in cash from Standard to ASRC on the date specified above regardless of whether Standard has theretofore exercised its option under this agreement to obtain any oil and gas lease on any ASRC lands. ASRC shall be entitled to retain both said Initial Cash Option Payment and said Additional Cash Option Payment regardless of whether Standard exercises its option hereunder to obtain any oil and gas lease on any ASRC land. 

THIS CAUSE comes before the court on cross motions for partial summary judgment.

Plaintiff, Ukpeagvik Inupiat Corporation, initiated this action to obtain an accounting of all funds received by defendant, Arctic Slope Regional Corporation, pursuant to the Alaska Native Claims Settlement Act of 1971, 43 U.S.C. §§ 1601 et seq. (1976) (“ANCSA” or “the Act”), and to obtain payments of all ANCSA funds to which it is entitled. Plaintiff is a Village Corporation organized pursuant to § 8 of ANCSA. Defendant is a Regional Corporation organized pursuant to § 7 of ANCSA.

In the cross motions for partial summary judgment, the court is asked to determine the distribution requirements of § 7(j) of ANCSA. 43 U.S.C. § 1606(j). Section 1606(j) requires a Regional Corporation to make certain cash distributions to Village Corporations and to region at-large stock-holders.

I. BACKGROUND

In enacting ANCSA, Congress intended to provide “a fair and just settlement of all claims by Natives and Native groups of Alaska, based on aboriginal land claims.” 43 U.S.C. § 1601(a); see generally United States v. Atlantic Richfield Co., 435 F. Supp. 1009, 1014-19 (D.Alaska 1977), aff’d, 612 F.2d 1132 (9th Cir. 1980) (court traces history of Alaska Native land claims). To this end, Congress declared that “the settlement should be accomplished rapidly, with certainty, in conformity with the real economic and social needs of Natives … with maximum participation by Natives in decisions affecting their rights and property….” 43 U.S.C. § 1601(b).

To accomplish a fair and just settlement in conformity with the Natives’ economic and social needs, Congress created an Alaska Native Fund of $962 million,[1] id. § 1605, and provided fee title to over forty million acres of Alaska land.[2] To achieve maximum Native participation in decisions affecting their rights and property, Congress provided for the creation of twelve Native Regional Corporations[3] (in which every eligible Native would hold 100 shares of stock) and over 200 Native Village Corporations. Id. §§ 1606, 1607.

A. The Regional Corporation

Congress chose the corporation as the vehicle for implementing ANCSA. Pursuant to § 7(a) of the Act, the Secretary of the Interior divided Alaska into twelve geographic regions. The regions were divided, as far as practicable, so that any given region reflected the common heritage of the Natives within its area.

The Act then required the Natives within each region to form a Regional Corporation, pursuant to the corporate laws of Alaska, to conduct business for profit. 43 U.S.C. § 1606(d). Following incorporation, each Regional Corporation was required to issue 100 shares of stock to each eligible Native within its region. Id. § 1606(g). The issued stock entitled the Native holder to all the rights of a stockholder in an Alaskan corporation, except that alienation was restricted until 18 December 1991 twenty years after enactment. Id. § 1606(h).

1. Regional Corporation Revenue Sharing

To “achieve a rough equality in assets among all the natives,” Aleut Corp. v. Arctic Slope Regional Corp., 421 F. Supp. 862, 867 (D.Alaska 1976), aff’d in part and rev’d in part sub nom. Chugach Natives Inc. v. Doyon, Ltd., 588 F.2d 723 (9th Cir. 1979), Congress declared that seventy percent of all revenues received by each of the Regional Corporations from timber and subsurface revenues be shared among the twelve Regional Corporations. 43 U.S.C. § 1606(i). The sharing of income among the Regional Corporations was limited, however, to timber and subsurface revenues. Additionally, the resource revenue sharing mandated by § 1606(i) did not include the thirteenth Regional Corporation, which lacks any natural resources.

To illustrate, the Regional Corporation which earns revenues from its resources retains thirty percent of the net revenue, and divides the remaining seventy percent among the twelve Regional Corporations, including itself. The division is made in proportion to the number of Natives enrolled in each Regional Corporation. Section 1606(i) thereby achieves a rough equality by allowing for the fact that some regions are resource-poor, while others possess a wealth of natural resources.

B. The Village Corporation

Pursuant to § 1607, Native residents of each Native village eligible for benefits under the Act were required to organize a profit or non-profit Village Corporation prior to receiving such benefits. Eligible villages were defined as communities, neither modern nor urban, composed of at least twenty-five Natives, with Natives representing at least fifty percent of the village population.[4] 43 U.S.C. § 1610(b) (2). See generally Arnold, et al., Alaska Native Land Claims, chs. 23, 25, 29 & 31 (1978 edition).

Although the Village Corporation does not hold stock in, and is not subsidiary to, the Regional Corporation,[5] the Act vests the Regional Corporation with certain Village Corporation control functions, and requires the Regional Corporation to be an active participant in the development of its region. Doyon, Ltd. v. Bristol Bay Native Corp., 569 F.2d 491, 496 (9th Cir. 1978), reh. den., 439 U.S. 954, 99 S. Ct. 352, 58 L. Ed. 2d 345 (1978). The initial articles of incorporation for each Village Corporation are subject to approval by the local Regional Corporation. 43 U.S.C. § 1607(b). The Act requires the Regional Corporations to redistribute certain funds to Village Corporations,[6] id. § 1606(j), but allows the Regional Corporation to withhold such funds pending a satisfactory village plan. Id. § 1606(l). Additionally, the Act authorizes the Regional Corporation to withhold village funds “to finance projects that will benefit the region generally.” Id. § 1606(m).

From a review of the Act’s sections vesting Regional control over Village Corporations, it is clear that Congress perceived the Regional Corporation “as a device to provide guidance, assistance, and control for the use of funds by the Village Corporations.” Price, Region-Village Relations Under The Alaska Native Claims Settlement Act, 5 UCLA-Alaska L.Rev. 58, 63 (1975). It is also clear that, following Regional Corporation approval of a satisfactory Village Corporation plan, and assuming no withholding to finance a regional project, certain ANCSA funds must be distributed to the Village Corporations and at-large stockholders. 43 U.S.C. § 1606(j). What specific funds must be distributed is, however, unclear.

II. SECTION 1606(j) AND “NET INCOME”

Section 1606(j) provides:

During the five years following December 18, 1971, not less than 10% of all corporate funds received by each of the twelve Regional Corporations under section 1605 of this title (Alaska Native Fund), and under subsection (i) of this section (revenues from the timber resources and subsurface estate patented to it pursuant to this chapter), and all other net income, shall be distributed among the stockholders of the twelve Regional Corporations. Not less than 45% of funds from such sources during the first five-year period, and 50% thereafter, shall be distributed among the Village Corporations in the region and the class of stockholders who are not residents of those villages, as provided in subsection to it. In the case of the thirteenth Regional Corporation, if organized, not less than 50% of all corporate funds received under section 1605 of this title shall be distributed to the stockholders.

43 U.S.C. § 1606(j) (1976) (footnote omitted).

The distribution mandated by the first sentence of subsection (j) is not at issue. The first sentence requires the Regional Corporations, during the first five years following passage of the Act, to pay their stockholders at least ten percent of all corporate funds received from § 1605, from § 1606(i), and from all other net income. The first sentence is relevant, however, to the parties’ disagreement regarding the construction of the second sentence, as the second sentence refers to the first in its distribution mandate.

The heart of the present dispute is whether the words “funds from such sources,” used in the second sentence, mean that fifty percent of “all other net income” (first sentence) must be distributed, in perpetuity, among the Village Corporations and at-large stockholders. The parties agree that the second sentence requires a Regional Corporation to distribute funds received under § 1605 and § 1606(i).

Plaintiff contends that the plain meaning of the second sentence mandates distribution of fifty percent of “all other net income.” Defendant asserts that, although subsection (j) is not a model of clarity, the use of the words “such sources” can only refer to the two distinct sources of corporate funds mentioned in subsection (j) § 1605 and § 1606(i) funds. The problem with both arguments is that both rely on the “plain meaning rule,”[7] to construe an ambiguous distribution requirement.

The Ninth Circuit Court of Appeals recently noted that the “plain meaning rule” has been relaxed. United States v. Atlantic Richfield Co., 612 F.2d 1132, 1136 (9th Cir. 1980), rehearing den., 449 U.S 888, 101 S. Ct. 244, 66 L. Ed. 2d 113 (1980). Accordingly, the court may examine legislative history to help it construe statutory language which seems clear on its face. Cf. Train v. Colorado Pub. Int. Research Group, Inc., 426 U.S. 1, 10, 96 S. Ct. 1938, 1942, 48 L. Ed. 2d 434 (1976) (no rule of law precludes the use of aid to construction of the meaning of a statute’s words, even when the words seem clear on superficial examination).

Here, the second sentence of subsection (j) is unclear regarding whether the words “from such sources” also refer to a Regional Corporation’s “net income”. Ambiguity is evident from the fact that commentators who have addressed the second sentence of subsection (j) have disagreed on whether net income must be distributed. Lazarus and West, The Alaska Native Claims Settlement Act: A Flawed Victory, 40 L. & Contemp.Prob.132, 162-64 (1976) (phrase “from such sources” not intended to encompass Regional Corporation net earnings); Price, Region-Village Relations Under ANCSA, 5 UCLA-Alaska L.Rev. 58, 62 n. 20 (1975) (resolve ambiguity regarding “all other net income” by requiring “net income” to be distributed under the second sentence). The fact that the “plain meaning rule” has been relaxed, coupled with the ambiguity of the second sentence, requires the court to analyze the relevant legislative history to aid in construction of subsection (j).

A. Legislative History Regarding Net Income Distribution

1. Prior Bills

The first bills introduced in Congress to settle Alaska Native land claims made no mention of corporations as vehicles for settlement. E. g., S. 1964, 90th Cong., 1st Sess. (1967). Business corporations were first proposed as a means of implementing a settlement during the second session of the 90th Congress. E. g., S. 2906, 90th Cong., 2d Sess. (1968). These bills, however, did not require any specific distribution following receipt of funds by the corporation. Id. § 306 (“money apportioned … shall be paid to the corporation for use in accordance with the annual budgets prepared by the corporation”).

The first mention of specific distribution requirements occurred in later bills introduced during the 91st Congress. E. g., S. 3041, 91st Cong., 1st Sess. (1969); H.R. 14212, 91st Cong., 1st Sess. (1969). These bills provided for an “Alaska Native Development Corporation,” a non-profit entity consisting of all eligible Alaska Natives, which would initially receive all of the “Alaska Native Compensation Fund.” E. g., H.R. 14212 § 8. The Development Corporation would then distribute ninety-five percent of the Native Fund to twelve Regional Corporations. Id. § 8(f) (1).

Each Regional Corporation was “required to organize an affiliated non-profit membership corporation … devoted to promoting the health, welfare, education and economic and social well-being of Natives of the region….” Id. § 9(f) (2) (A). The profit arm of the Regional Corporation was required to distribute to its affiliated non-profit arm between ten and fifty percent of all monies received from the Alaska Native Fund, and “all its other net income.” Id. § 9(f) (2) (B). There was no fixed distribution requirement mandated to the non-profit arm of the Regional Corporation. The Act simply provided that the affiliated non-profit corporation may distribute to eligible Natives no more than twenty percent of the monies paid to it. Id. § 9(f) (2) (C).

The last two bills which preceded the enactment of ANCSA were introduced in the 92nd Congress. H.R. 10367, 92nd Cong., 1st Sess. (1971); S. 35, 92nd Cong., 1st Sess. (1971). S. 35 would have established an “Alaska Native Investment Corporation” and an “Alaska Native Services and Development Corporation” to receive Alaska Native Fund money. S. 35, 92nd Cong., 1st Sess. § 5(e) (1).

The Investment Corporation was to be a profit making corporation in which all eligible Natives were to be members. Id. § 10(g). The Investment Corporation was required to pay all Native stockholders total cash dividends of at least $1 million for the first five years following passage of the act. Id. § 10(h) (1). There was no specific net income distribution requirement.

The Services Corporation was to be a non-profit membership corporation, providing social services, as well as technical advice, financial assistance, and other related services to the Natives. See id. § 8(i). The Services Corporation was required to distribute Fund monies to the Village Corporations, the Regional Corporations, and the Urban and National Corporations[8] in accordance with the act. Id. § 8(f) (1). The sole source of these distributions was to be the Alaska Native Fund.

The only reference to net income in S. 35 was in § 9 dealing with Regional Corporations.[9] The bill stated that each Regional Corporation may organize an affiliated nonprofit corporation “devoted to promoting the health, welfare, education, and economic well-being of the Natives of the region….” Id. § 9(f) (2) (A). The bill then provided that if a non-profit arm was formed the Regional Corporation may distribute to it between ten and fifty percent of Alaska Native Fund money, and all its other net income. Id. § 9(f) (2) (B). Clearly, this was not a mandatory net income distribution requirement.

The final House bill, H.R. 10367, was less complex and, in structure, similar to the final Act. Under the House bill, all Alaska Fund Money went to twelve Regional Corporations. H.R. 10367, 92nd Cong., 1st Sess. § 7(a) (2) (1971). The Regional Corporations would also receive title to the subsurface estate of all village lands. Although a Regional Corporation was required to share its natural resource income with the other Regional Corporations on a per capita basis, id. § 6(g), there was no required distribution of net income. The bill allowed a Regional Corporation to invest all “funds received and retained … from any source … for the production of income….” Id. § 6(h). There was no distribution requirement if the Regional Corporation used all its funds for investment in income and/or for social services.[10]

2. The Conference Report

In regard to the second sentence of § 1606(j), the joint House and Senate Conference Committee stated:

Each Regional Corporation must distribute among the Village Corporations in the region not less than 50 percent of its share of the $962,500,000 grant, and 50 percent of all revenues received from the subsurface estate. This provision does not apply to revenues received by the Regional Corporations from their investment in business activities.

Conference Rep.No. 92-746, 92nd Cong., 1st Sess. 36 (1971), reprinted in [1971] U.S.Code Cong. & Admin.News 2192, 2247, 2249.

Although the Conference Report contains several obvious misstatements,[11] and is less detailed than subsection (j) itself, the fact that the committee expressly stated that the fifty percent distribution requirement of § 1606(j) only applied to Alaska Native Fund monies and subsurface revenues, and not revenues received from investment, lends strong support to defendant’s position.

B. § 1606(j) Distribution and the Thirteenth Regional Corporation

Further support for defendant’s position is found in subsection (j)’s treatment of the thirteenth Regional Corporation. It is clear that the thirteenth Regional Corporation, lacking subsurface resources, does not participate in § 1606(i) revenue sharing. Nevertheless, the thirteenth Regional Corporation is organized to conduct “business for profit,” and, like the other twelve Regional Corporations, has the potential of realizing “net income” from its investment activities. The last sentence of § 1606(j), however, makes no mention of a net income distribution requirement in regard to the thirteenth Regional Corporation. The last sentence simply provides: “In the case of the thirteenth Regional Corporation … not less than 50% of all corporate funds received under section 1605 of this title [Alaska Native Fund] shall be distributed to the stockholders.” 43 U.S.C. § 1606(j).

This last sentence of subsection (j) requires a distribution by the thirteenth Regional Corporation which is analogous to the distributions by the twelve Regional Corporations required in the second sentence of subsection (j). The fact that Congress clearly did not require the thirteenth Regional Corporation to distribute its net income leads to the conclusion that it intended a similar result in regard to the other twelve Regional Corporations.

From an analysis of § 1606(j), the court concludes that although the words “funds from such sources” are ambiguous, the legislative history of ANCSA as well as the treatment of the thirteenth Regional Corporation in subsection (j) resolve the ambiguity and make clear that “all other net income”, as used in the first sentence, is not a “source” which must be distributed under the second sentence. Accordingly, the second sentence of subsection (j) does not require Regional Corporations to distribute any net income to Village Corporations and at-large shareholders.

III. SECTION 1606(j) AND RESOURCE REVENUE DISTRIBUTION

As previously discussed, § 1606(i) requires each Regional Corporation to distribute seventy percent of all net revenues received from the timber and subsurface estate proportionately among the twelve Regional Corporations. Subsection (j) then provides in part that fifty percent of the “funds received by each of the twelve Regional Corporations under … subsection (i) …. shall be distributed among the Village Corporations in the region” and the at-large stockholders in the region. Plaintiff maintains that given certain language in the Conference Report, subsection (j) requires each Regional Corporation to pay out one-half of its retained resource revenues as well as revenues received under subsection (i).

The Conference Report sentence relied upon by plaintiff states: “Each Regional Corporation must distribute among the Village Corporations in the region not less than 50 percent of its share of the $962,500,000 grant [Alaska Native Fund], and 50 percent of all revenues received from the subsurface estate.” Conference Rep.No. 92-746, 92nd Cong., 1st Sess. 36 (1971), reprinted in [1971] U.S.Code Cong. & Admin. News 2247, 2249. This sentence is inaccurate on its face regarding subsection (j) resource revenue sharing. The sentence fails to mention the subsection (j) distributive rights of the at-large stockholders, and wholly overlooks the fact that subsection (j) requires timber resources to be shared as well as revenues from the subsurface estate.

Additionally, subsection (j) requires “funds received … under subsection (i)” to be distributed. (emphasis added). The only funds a Regional Corporation “receives” under subsection (i) are its proportionate share of the seventy percent which must be shared among the twelve Regional Corporations. The thirty percent exempt from subsection (i) sharing is retained by the resource-holding corporation. As the Ninth Circuit Court of Appeals has explained:

[Section] 1606(i) … provides that 70% of all revenues received by each Regional Corporation from timber and subsurface estate resources must be divided among all 12 Regional Corporations in proportion to the number of Natives enrolled in each region. At least 50% of the revenues so received must be redistributed among the Village Corporations.

Chugach Natives v. Doyon, 588 F.2d at 724 (emphasis added).

Finally, no prior Alaska Native settlement bill required Regional Corporations to make mandatory distributions of retained resource revenues to Village Corporations and at-large stockholders. The court concludes that § 1606(j) requires a Regional Corporation to distribute to Village Corporations and at-large stockholders its received seventy percent share of § 1606(i) resources, but not, in the case of a resource-holding Regional Corporation, its thirty percent retained share.

IV. SECTION 1606 OF ANCSA

It is clear from § 1606 that Congress intended the Regional Corporation to be the economic foundation which would allow the Natives to build upon the settlement, and which would preserve the benefits of the settlement for future Native generations. Therefore, a principal function of the Regional Corporation is to actively conduct business for profit. A successful profit-making Regional Corporation prevents dissipation of ANCSA funds by providing a secure capital base for investment. Moreover, a successful profit-making Regional Corporation will withstand the test of time and allow future Native generations to seek self-determination through stockholder participation in corporate affairs.

Finally, there is no legitimate reason, given the need for a strong economic foundation to build upon, to require the Regional Corporations to pay fifty percent of their net income and fifty percent of their retained § 1606(i) revenues to Village Corporations and at-large stockholders. Such a requirement would erode the economic strength of the Regional Corporations, and thereby weaken the foundation for the settlement, the Regional Corporations.

Accordingly, IT IS ORDERED:

1. THAT plaintiff’s motion for partial summary judgment is denied.

2. THAT defendant’s motion for partial summary judgment is granted.