An appeals court ruled yesterday that the federal government could take 31 acres into trust for the Narragansett Indian Tribe in a case at the crux of a struggle between the state and the tribe over control of tribal lands.

A divided 1st U.S. Circuit Court of Appeals found that the U.S. Department of Interior could hold the land for the Narragansetts, freeing it from state and local laws and placing it solely under tribal and federal authority.

The property sits across Kings Factory Road from the tribe’s other 1,800 acres in Charlestown. Set on a hillside just north of Route 1, it is the site of a troubled housing project for the tribe’s poor elders.

While Narragansett leaders celebrated the decision as an affirmation of the tribe’s rights, state and local officials declared it “devastating” for Rhode Island. They promised to appeal.

“Attorney General [Patrick] Lynch thinks that these issues are so important and have such far-reaching impacts on Indian law both locally and nationally that he plans to appeal to the [U.S.] Supreme Court,” his spokesman Michael J. Healey said of the closely watched case.

The Narragansetts bought the 31 acres in 1991 to build housing for its elderly members. That project, mired by mismanagement, stalled when the tribe began construction without securing state and local permits.

The state and the Town of Charlestown filed suit against the Interior Department after it agreed to take the land into trust for the tribe in 1998. U.S. District Judge Mary Lisi ruled in the department’s favor in 2003.

A three-judge panel from the 1st U.S. Circuit Court of Appeals upheld that decision in 2005. The full appeals court decided to take up the case, at the state’s request, and lawyers for the state and the U.S. Justice Department argued before the judges in January.

In yesterday’s 4-to-2 opinion, Judge Sandra L. Lynch disputed the state’s argument that the Interior Department could not take land into trust for tribes that were not recognized at the time of the Indian Reorganization Act of 1934. The Narragansetts won recognition in 1983.

The secretary of the interior, she wrote, viewed the act as intended not only “to remedy past wrongs, but also to encourage strength and stability of tribal communities.”

“Based on this view, it would make no sense to distinguish among tribes based on the happenstance of their federal recognition status in 1934,” she said.

Additionally, Judge Lynch dismissed the claim that the 1978 agreement that gave the tribe its 1,800 acres barred the federal government from placing the 31 acres in trust.

The Narragansett Tribe filed suit in 1975, seeking the return of 3,200 acres stretching from Route 1 north to Narragansett Trail in Charlestown. After more than a year of talks, a settlement was reached in 1978 between the tribe, state, town and federal government that gave the Narragansetts 1,800 acres.

Lynch took issue with the state’s notion that if the 31 acres was taken into trust, that it should be held to the same terms as the tribe’s other land. The 1978 settlement, which became federal law, places the 1,800 acres under the state’s civil and criminal laws.

Lynch interpreted the 1978 settlement literally, noting that it stated that “the settlement lands shall be subject to the civil and criminal laws and jurisdiction of the state of Rhode Island.”

“No other provision of the Settlement Act directly provides for state jurisdiction outside of the settlement lands,” Lynch wrote. “No language in the act applies state law to lands the tribe might later acquire.”

More importantly, she added, no language explicitly limits the Interior Department’s power to take lands into trust.

The court challenged the state to turn to Congress, if it wished to change federal law.

“The judiciary may not usurp the role of Congress,” she said.

In dissenting opinions, Judges Jeffrey R. Howard and Bruce Selya criticized the majority for taking too narrow a reading of the 1978 land settlement.

“[The] majority gives short shrift not only to the interests of the State of Rhode Island but also to the carefully calibrated arrangements crafted between the state and the tribe,” Selya wrote. “It strains credulity to surmise, as does the majority, that the state would have made such substantial concessions — including the transfer, free and clear, of 1,800 acres of its land — while leaving open the gaping loophole that today’s decision creates.”

The issues, he said, would benefit from consideration of the Supreme Court.

Chief Sachem Matthew Thomas praised the decision. “It shows that the tribe does have these federal rights.”

Thomas said the land would be used for housing for the elderly, but state leaders worried yesterday that the ruling could clear the way for the tribe to build a casino, smoke shop or other industry — without state oversight.

“For the first time in the constitutional history of Rhode Island, this decision will create Indian Country in our state,” said Jeff Neal, Governor Carcieri’s spokesman. “The tribe will now claim an exemption to state law on any land it wants to take into trust.”

The opinion paved the path for the Narragansetts to seek lands from “Woonsocket to Westerly,” he said.

“If this decision stands, it could be devastating to Rhode Island sovereignty and to the ability of its citizens to control what happens inside the state’s borders,” he said. He added: “The irony of this decision is that the 1,800 acres of settlement lands might be the only place where the state can successfully uphold its sovereignty. That’s an absurd situation.”

The same court ruled last year that the state could enforce its laws on the Narragansetts’ 1,800 acres in the smoke-shop case.

John Brown, a tribal councilman and medicine man-in-training, relished yesterday’s decision as critical in protecting the Narragansetts’ interests as well as the federal government’s right to take land into trust for tribes. But he braced for a Supreme Court, and probably a congressional, battle ahead.

“This is not the end of this,” he said.

kmulvane@projo.com