Interior Department Streamlines Rules for Renewable Energy Development and Business Leases on 56 Million Acres of Tribal Lands

December 17, 2012

Renewable energy developers and businesses operating on tribal lands have received a nice holiday gift from the Department of Interior's Bureau of Indian Affairs ("BIA"). Effective January 4, 2013, new regulations will govern leases for the development of renewable energy, as well as non-energy businesses and residences, on 56 million acres of tribal lands. The new regulations promise to reduce delays and uncertainty associated with the current leasing process, thereby improving the climate for investment for renewable energy and other business ventures on tribal lands. BIA's summary of the new rule is available here.

While the old rules lumped surface leases into a single process, the new rules create several different categories of leases, including two types of leases intended to encourage renewable energy development on tribal lands, leases for other kinds of businesses, and residential leases. The rules provide specific limits on the time allowed for BIA to review each type of lease, increase deference to tribal decisions on leasing, and provide greater flexibility on issues such as lease valuation and in-kind compensation for leasing.

The new rules are of particular interest for renewable energy developers. They create two new lease categories specifically tailored for the needs of wind and solar developers, the Wind Energy Evaluation Lease ("WEEL") and the Wind and Solar Resource ("WSR") lease. Under a WEEL, a wind developer may obtain the right to temporarily place meteorological towers and other devices intended to evaluate wind energy prospects on tribal land. BIA must approve a WEEL within 20 days, and such leases are subject to limited NEPA review and no lease valuation requirement. The WEEL may allow the developer an option for a permanent WSR lease.

A WSR, by contrast, allows for erection of permanent wind towers or solar panels on tribal lands. WSRs may be for a term of up to 25 years, with an option for a second 25-year term (certain tribes are authorized to enter into leases for up to 99 years). BIA has 60 days to review a WSR, with an option for a 30-day extension. This represents a significant improvement over the current system, in which BIA approvals often take a year or more. While BIA will continue to require a lease valuation for WSRs, the new rules provide substantial new flexibility for such valuations, including evaluations by the tribe where tribal-owned (as opposed to individually-owned) lands are involved. The new rules also allow tribes to opt out of the requirement for adjustment of rents every five years.

The new rules also provide important improvements in the current leasing process for business leases, which include leases for biomass and other types of renewable energy development (other than solar and wind) as well as non-energy development. The rules impose specific time limits for BIA review of such leases, modify rules for lease valuation, accord greater control to tribal decisions, and provide important clarification on the taxation of such leases. Existing rules for agricultural leases and for subsurface leases remain in place.

If you have any questions, please contact one of the attorneys in Gordon Thomas Honeywell's Energy, Utilities and Telecommunications Practice Group. You may also contact one of the attorneys in GTH's Federal Indian Law Practice Group. The attorneys at Gordon Thomas Honeywell have extensive experience assisting clients in operating businesses on tribal lands, and in all areas of the energy and utility industries, including regulatory matters, project development, renewable energy, power purchase agreements, REC purchase agreements, transmission, taxation, municipal law, cooperative law, public records requests and general operations