Tribal Renewable Energy Projects: Balance Opportunity with Caution

Much of the southwestern and mountain states land held in trust for Native American tribes offers substantial opportunities to developers of wind power, solar energy and other renewable energy resources.

The federal government’s support for renewable energy sources dovetails with programs and statutes meant to encourage tribal renewable energy development, such as the grants and technical assistance offered by the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy (EERE) under the Indian Tribal Energy Development and Self-Determination Act (Title V of the Energy Policy Act of 2005).  In fact, on February 16, 2012, the DOE awarded more than $6.5 million in funding to 19 clean energy projects planned for development on tribal land.  

But renewable energy developers should not be blinded by visions of lucrative federal assistance and willing tribal governments eager to create 21st century, sustainable economies. Prudent developers will balance any such perceived opportunities with a healthy respect for the uniqueness of doing business on tribal land. They will understand that their due diligence will have to include more than the the usual investigation and modeling of resources, title insurance, licenses, joint use agreements, construction contracts and regulatory proceedings that all projects face.

Instead, they will realize that the dynamic in Indian country is different and that, if their projects are to succeed, they must appreciate tribal culture, mores, laws as well as the interplay between federal Indian, tribal and state law with the legal and regulatory framework within which renewable energy is developed outside of Indian lands. Failing to understand these factors adds an undue risk of financial and legal disaster that can quickly overcome what otherwise could be a successful, lucrative business venture. 

Sovereign and Unconventional

First, it’s important to realize that Indian tribes are sovereign entities that have their own governing bodies, their own laws and their own land over which they have jurisdiction and control.  The following realities can make or break a renewable energy project; and it is up to the developer to figure them out:

• In Indian country there may be no familiar law governing the granting and perfection of security interests.
• Typical remedies in the event of a default may not be available under applicable federal law and tribal law.
• Litigation may not be the preferred, or even an acceptable, method of dispute resolution. 
• Tribal law may not be codified.
• There may be no established formal judicial system for hearing disputes.
• There may be no written rules of court procedure and court opinions may not be available for review by non-tribal members.

Tribes also continually interact with the federal government and its primary administrative agency for tribes, the Department of the Interior.  Pursuing energy projects requires negotiating with these authorities, as well as structuring business contractual agreements to accommodate the unique aspects of tribal law.

Remedies and Enforceability

What this all means is that non-Indians working with this system are likely to need assistance navigating it and will find their way more easily if they are respectful, flexible and tolerant of differences in law, procedure, style and personality. 

Take, for example, the fact that tribes are sovereign and cannot be sued.  Energy investors and developers of projects in Indian country must understand and prepare for all contingencies by securing a sovereign immunity waiver that is authorized as required by tribal law.  The waiver will determine whether they have viable remedies if the tribe defaults or if commercial disputes arise with the tribe. 

Also, land titles can be complex. In many cases, the title to Indian land is held in trust by the United States for the tribe’s benefit. The general rules are that tribal trust land may not be sold, taxed or encumbered and that the Secretary of the Interior’s approval is required for leases of trust land. Lease terms typically are limited to 25 years with a 25-year renewal, unless otherwise provided by statute.  Also, Secretarial approval is required for mortgages on leasehold interests in tribal land. A leasehold mortgage may permit the lender to exercise dominion and control over leased land in the event of a default; but determining the status of land requires reviewing treaties, acts of Congress, proclamations by the Secretary of the Interior, title records and other sources.  You should always use a title company with appropriate knowledge to conduct an Indian land title search and to insure any leasehold mortgage of Indian land.

Judgments and Rules

Finally, in structuring an energy transaction with a tribe, investors and developers must consider how to enforce a judgment if one is obtained.  Federal law, tribal law, the power and authority of the tribe and scope of the tribe’s waiver of sovereign immunity may limit whether or not a creditor is able to execute against tribal property.  Therefore, it is critical that the waiver include language allowing enforcement of judgments, identifying the property upon which execution can be made and, if the property is located outside of Indian land, stating that the judgment may be enforced by a state and/or federal court.

In conclusion, even though the issues here highlight the realities of development on tribal lands, the issues are not insurmountable; and I don’t wish to discourage business interests who wish to pursue renewable energy projects in Indian country. 

Current opportunities like the Navajo Nation’s Big Boquillas and Gray Mountain wind energy projects on its lands in Arizona (with more than 500 MW of planned capacity and a 500 kV transmission line), integrated development of solar, geothermal and wind energy resources at the Zia Pueblo in New Mexico, development of a biomass-powered heating system by the Port Graham Village Council in Alaska and development of a 4 MW of solar facility at the Jemez Pueblo in New Mexico and a 227 MW Alder Stream Wind Project at the Penobscot Indian Nation in Maine are certain to increase in the future. 

But the fundamental message for developers is clear:  Know the rules, or suffer the consequences if something goes wrong.   Projects will have a much better chance of a favorable outcome by dealing with reality, not hope, right from the start of any deal.

Nancy J. Appleby, principal of Appleby Law PLLC, has 30-plus years of experience in Indian law and in the real estate, energy, commercial finance and project development business sectors that seek to pursue business opportunities on Native American lands.  She has been selected for inclusion in such authoritative lawyer rankings as The Best Lawyers in America and Chambers USA.  Direct questions to her at 703-837-0001 or by email at nancy@applebylawpllc.com.