Renewable Energy Update: Proposed Regulatory Changes For Tribal Leases Provide Promise for Solar and Wind Projects

March 19, 2012

by Scott Castro

While there has been strong interest among the tribes to develop renewable energy projects on their lands, antiquated leasing rules have long served as a bar to such efforts. However, on November 28, 2011, the Department of Interior (DOI) announced a proposed rule revising the federal surface leasing regulations for American Indian lands that could dramatically reduce the timeline for solar and wind lease approvals on Indian land. If the proposed rule is adopted, it may help to stimulate investment in solar and wind projects on Indian lands by fast-tracking and streamlining agency review and approval of proposed solar and wind leases. Solar and wind companies would be well-served to understand the full scope of the proposed rule, and to evaluate -- or re-evaluate -- potential leasing opportunities on tribal lands, particularly given that DOI, acting as trustee, is charged with managing approximately 56 million surface acres of tribal lands.

Streamlining the Approval Process

The proposed rule would modify regulations governing the Bureau of Indian Affairs' (BIA) process for approving surface leases on lands held by the federal government in trust for tribes and individuals. Specifically, the proposed rule would create a new subpart concerning "Wind Energy Evaluation Leases (WEELs) and Wind and Solar Resource (WSR) Leases."
At its core, the proposed rule would streamline the leasing process of Indian lands by imposing a 60-day timeline on the Department for approval of WSR leases, with an optional 30-day period if needed. WEELs (which are short-term leases intended to allow wind developers to evaluate wind resources) would be subject to a 20-day approval period (with an optional 30-days if needed). The proposed rule sets similar timeframes for BIA decisions on lease amendments, lease assignments, subleases and leasehold mortgages. The proposed rule also would provide additional requirements, including maximum lease terms of 25 years with a one-type 25-year extension, performance bond, insurance and indemnification requirements, and enforcement/remedy provisions.

These changes to the leasing regulations would be an important step for solar and wind developers interested in potential projects on Indian lands. This is particularly true given that previously, the BIA was subject to no time limits, and lease applications could be delayed for years. If adopted, the proposed rule would significantly reduce the prior uncertainty under this process by establishing short time windows for BIA review and approval of proposed leases, thus providing tribes, developers and investors with far greater certainty.

Remedying Failed Efforts Under the Energy Policy Act

The proposed rulemaking is notable given the failure of provisions in the Energy Policy Act of 2005 to foster energy development, including renewables, on Indian lands. The Energy Policy Act of 2005 included a provision intended to promote energy development on Indian lands by requiring the DOI establish a process by which tribes can enter into what is known as a Tribal Energy Resource Agreement (TERA) with the Secretary of Interior. Under the TERA regulations issued by DOI in March 2008, if a tribe can meet the multiple criteria for a TERA, the tribe is responsible for managing energy development within its territory without approval from the Secretary of Interior. TERAs allow tribes to avoid certain federal requirements, notably compliance with the National Environmental Policy Act. While the TERA process aims to provide tribes with greater authority and autonomy to pursue energy development on their lands, to date, no tribe has entered into a TERA. Many believe that the waiver of federal liability under the TERA provisions, coupled with other factors, have dissuaded tribes from pursuing TERAs.

Continuing Government Support for Renewables on Indian Lands

The proposed rulemaking, by focusing on solar and wind projects, and by avoiding the current problems with the TERA process, may serve as a catalyst for increased renewable energy efforts on tribal lands. Indeed, the federal government's continued interest in and support for such developments, particularly financial support, should provide added incentive. For example, the Department of Energy and the Office of Indian Energy Policy and Programs (OIEPP), just awarded on February 16, 2012 over $6.5 million in funding to 19 clean energy projects on tribal lands for feasibility studies, pre-construction, and installation activities.

A series of meetings were held in January 2012, and the 60-day public comment period closed at the end of January 30, 2012. The proposed rule and public comments are currently undergoing agency review, and a final rule is expected sometime later this year.