SYRACUSE, N.Y. (AP) -- The federal government said Tuesday it will place 13,004 acres of upstate New York land into trust for the Oneida Indian Nation.

Opponents have 30 days to challenge the decision by U.S. Secretary of Interior Dirk Kempthorne, department spokesman Chris Paolino said.

The acreage is slightly less than the 13,086 acres recommended earlier this year as the preferred alternative by the U.S. Bureau of Indian Affairs. Paolino said the final footprint left out one parcel previously included.

"They will have sovereignty over their lands, but in most instances the laws of the country still take precedence. Certainly, all questions of sovereignty and legality now properly reside in the federal court as opposed to the state court system," Paolino said.

The Oneidas had asked for 17,370 acres to be placed in trust, which exempts the property from state and local taxes and laws. Government leaders from Madison and Oneida counties wanted no more than 1,030 acres included.

"The Oneida people are sincerely grateful to everyone who's hard work has led to this initial step toward further securing our Oneida homelands," Nation Chief Executive Officer Ray Halbritter said in a prepared statement.

The Oneidas once possessed about 300,000 acres within their reservation, nearly all of which was illegally conveyed to the state without federal approval.

Upstate Citizens for Equality, a grassroots group that opposes Oneida sovereignty, plans to file a federal lawsuit to challenge the decision, said David Vickers, the group's president.

"We relish this opportunity to actually join and influence this debate and take it away from the politicians who have so badly bungled it at every opportunity," Vickers said.

"This gives us the opportunity to go into court with well-reasoned, well-documented facts and historical interpretations of the law to make our case. ...It is now our show. We are calling the shots," Vickers said.

Officials from Madison and Oneida counties and Gov. David Paterson's office were not immediately available for comment.

Interior and BIA officials described the plan as its "preferred alternative" from among nine options and said it represented "a compromise action" that meets the tribe's needs to re-establish a sovereign homeland while addressing the concerns of local governments over "checkerboarding" by keeping the parcels compact and relatively contiguous.

The 13,004 acres sit in "two relatively condensed clusters" and includes the tribe's Turning Stone Resort and Casino in Verona and the nation's 32-acre territory near Oneida, where many of its government and cultural offices are located.

The area contains about 80 percent of the nation's housing, the majority of its government services, the casino and its four golf courses and four of the tribe's 13 SavOn gas stations and convenience stores. It also includes about 9,700 acres of farmland.

The proposal would set aside 8,751 acres in Oneida County and 4,253 acres in Madison County -- in both instances, about 1 percent of the county's total area, the department said.

According to a BIA analysis, the exempted land would cost the counties about $2.19 million in annual property taxes -- not including the contested assessment on the casino, which the counties say owes $12.2 million a year in taxes.

But the BIA found that loss would be offset by the growth in the income, sales and property taxes paid by Nation employees resulting in "net benefit revenues to New York state and local governments." In 2005, that trade-off amounted to about a $16.8 million benefit for the state and local governments, the BIA said.

The BIA determined placing the land in trust would pose no greater demands on local community facilities and services.

The Oneidas filed their trust application in April 2005 after the U.S. Supreme Court ruled against the tribe in a long-running dispute with the city of Sherrill over unpaid taxes on Indian-owned property.

In that decision, the Supreme Court decided ancestral land reacquired by the nation was not sovereign and, as a result, was taxable and subject to governmental controls like zoning and use regulations. However, the justices suggested the tribe consider placing its reacquired lands in federal trust.

The counties and state steadfastly opposed the Oneidas' application. One of their biggest concerns was creating a checkerboard of jurisdictions that would seriously burden local governments, taxpayers and landowners.

The nation claimed rejection of the application would threaten the future of the tribe's successful casino and resort, which provides about 4,000 jobs, as well as the welfare of the approximately 1,000 nation members.