INDIAN TRIBES--BUSINESS PARTNERS AND MARKET PARTICIPANTS: STRATEGIES FOR EFFECTIVE TRIBAL / INDUSTRY PARTNERSHIP
| Jurisdiction | United States |
(Mar 2011)
INDIAN TRIBES--BUSINESS PARTNERS AND MARKET PARTICIPANTS: STRATEGIES FOR EFFECTIVE TRIBAL / INDUSTRY PARTNERSHIP
Modrall Sperling
Albuquerque, New Mexico
LYNN H. SLADE is a partner in the Albuquerque office of Modrall Sperling and serves as Co-Chair of the firm's Indian Law Practice Group. He represents energy, resource, and financial companies, as well as State and local governments, in matters pertaining to energy and natural resources, with an emphasis on matters arising in Indian country. His Indian law practice includes structuring and documenting energy development and resource transactions, acquisitions, and financial instruments, as well as litigation concerning enforceability of Indian country agreements and taxation and regulation in Indian country. He serves on the Advisory Council of the Utton Center for Transboundary Resources and as New Mexico State Chair for the United States Supreme Court Historical Society. He has served as Chair of the Committee on Native American Natural Recourses of the American Bar Association Section of Environment, Energy and Resources, and as Membership Officer and Member of the Council of the Section. He served as Chair of the Natural Resource Section of the State Bar of New Mexico and on the Board of Directors of the Indian Law Section of the State Bar of New Mexico. He has served as Trustee (at large) of the Rocky Mountain Mineral Law Foundation. He has been recognized as one of New Mexico's "Top 25" Super Lawyers and is recognized as a National Leader in Native American Law by the Chambers USA 2010 Directory. He is a graduate of the University of New Mexico School of Law, where he served as Editor of the New Mexico Law Review.
I. Introduction.
II. The Development Package: Securing Necessary Property and Development Rights.
[1] Identifying the Parties' Interests.
[2] Agreements for Partnering in Energy and Mineral Development.
[a] Indian Mineral Development Act.
[b] Tribal Energy Resource Agreements.
[3] Surface Use for Energy, Including Renewable Energy, and Mineral Development.
[a] Business Site Leasing.
[b] Approval of Contracts Under 25 U.S.C. § 81.
[c] Rights-of-Way and Access Rights.
[4] Other Authorities.
[a] The Indian Mineral Leasing Act of 1938.
[b] Allotted Lands Leasing Act of 1909.
[f] Other Authorizations or Guidance.
[5] Renewable Energy Development.
[6] Compliance with Requirements for Valid Federal Approval.
[a] National Environmental Policy Act ("NEPA").
[b] Cultural Resource-Protective Statutes and Regulations.
III. Structuring the Deal: Property and Partnership.
[1] Determining Proper Parties: Tribes and Tribal Entities.
[2] Structuring the Deal: Tribal Equity vs. Lease.
[3] Structuring Development to Minimize Total Taxation.
[4] Addressing Commercial Law in Indian Country.
[5] Designing Enforceability Provisions.
[6] Contractually Fostering Economic Stability.
[7] Financing the Deal.
[a] Federal Financial Incentives.
[b] Collateralizing Indian Country Financing.
IV. Tribes as Market Participants.
V. Conclusion.
I. Introduction.
Energy and mineral development on Indian lands, like federal Indian law and policy, has evolved over the past century and a half. Balancing tribes' economic and other involved interests and the need for federal protection against improvident transactions, many tribes have grown from passive recipients of revenues generated by federal government management of resources to co-participants, in a sense partners, in development and active participants in energy and mineral resource markets.2
Mineral leasing of tribal lands began in 1891 with a statute that authorized leasing of lands "bought and paid for" by the tribe.3 The 1891 Act provided a format that became a longstanding model: leases could be made "by the council speaking for such Indians," for statutorily restricted terms, "subject to the approval of the Secretary of the Interior." A 1909 statute expanded the authorization to allotted lands,4 and a series of inconsistent statutes expanded mineral leasing of tribal lands, but left mineral leasing on Indian lands "in a state of
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confusion."5 Congress attempted to inject uniformity into tribal mineral leasing by enacting the Indian Mineral Leasing Act of 1938 ("IMLA").6
The IMLA's format of Bureau of Indian Affairs ("BIA")-supervised leasing employing standardized lease forms, governed by prescriptive regulations, and subject to tribal consent, became the template for energy and mineral development of Indian lands for nearly half a century. The IMLA called for tribes to receive a percentage royalty. As tribes became more sophisticated, and increasingly dissatisfied with the economic returns from BIA leasing, they began negotiating their own agreements on forms very different from those the BIA regulations prescribed, and questions arose as to whether the extant leasing statutes authorized such agreements.7 Formation of the Council of Energy Resource Tribes provided a forum for focus on tribal initiative and management in energy and resource development and technical support for those efforts.8
Tribes, and supportive industry, went to Congress, calling for a greater tribal role in formulating the terms of energy and mineral development agreements and for the flexibility to pursue equity or other non-royalty interests in developments through joint venture or other forms of agreement. Those demands led to enactment of the Indian Mineral Development Act of 1982 ("IMDA").9 More recently, some tribes proposed they were burdened competitively by the requirements for securing federal approval of energy and mineral development agreements, and sought statutory authority to assume the BIA's duties in leasing tribal lands. Those demands led
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to enactment of the Indian Tribal Energy Development and Self-Determination Act of 2005 ("ITEDSA").10 ITEDSA authorized tribes that develop economic and environmental review capacities to enter into Tribal Energy Resource Agreements ("TERAs") and secure Secretarial approval to review and approve their own energy and mineral agreements, eliminating BIA approval.11
Leasing of Indian lands for non-resource-extractive development, now reflected in numerous renewable energy proposals, may rely on different authority. Prior to 1955, there was no uniform authority for business leasing of tribal lands. The Business Site Leasing Act of 1955 ("BSLA") was enacted to provide a template and flexible authority; it likely will afford the basic authority for renewable energy developments other than geothermal development. The BSLA may offer opportunities to bypass BIA approval requirements in some transactions.12
This Paper seeks to provide guidance on how tribes and developers may employ these statutory authorities, and some others, taking flexible approaches to harmonizing parties' interests, to develop win-win agreements for "partnering" in energy and mineral development in Indian country.13 The paper will touch briefly on tribes' roles as market participants in energy and mineral development.14
II. The Development Package: Securing Necessary Property and Development Rights.
Mineral and energy, including renewable energy, development require rights to explore for and extract or use needed lands and natural resources, and to access associated real property
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for ingress to and egress from the lands involved for personnel or products, and, often, to use other lands for processing or administration.15 The federal trust responsibility with respect to Indians and their lands and minerals may affect every stage of the development process. The Indian Non-Intercourse Act, enacted originally by the very first Congress, underlies all federal statutes authorizing tribes to transfer interests in lands or minerals: absent valid federal approval, no transaction within its scope by any "Indian nation or tribe of Indians, shall be of any validity in law or equity."16 As a result, in every transaction, it must be determined whether the transfer is subject to the Non-Intercourse Act and, if so, what statute authorizes the transfer
Agreements that grant rights to operate on tribal or allotted lands or minerals generally must be authorized by a specific statute and approved by duly authorized federal officials, usually of the BIA,17 who must, in turn, satisfy requirements for federal environmental and cultural resource review similar to those applicable on federal public lands.18 Securing required approvals can be time-consuming and expensive, but the consequences of failure to secure proper approvals can be severe.19 There are only limited exceptions to the Secretarial approval requirement. Secretarial approval may not be required for agreements that do not "encumber"
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tribal lands for seven or more years under as provided by 25 U.S.C. § 81,20 tribally approved agreements under "TERA Agreements" authorizing tribes to approve agreements in lieu of BIA approval,21 and leases by certain tribally owned corporations chartered under Section 17 of the Indian Reorganization Act of 1934.22 Developers and tribal partners face a common challenge: structuring a transaction that optimizes the compatible interests of the tribe and developer, including possibly a tribally or Native American-owned developer, and that accommodates securing required federal authorization in the manner best suited to furthering those interests.
[1] Identifying the Parties' Interests.
Energy and mineral development in Indian country may bring into play interests and concerns not present elsewhere. The differences stem from the sovereignty of the tribe involved and the federal government's trust responsibility. For a tribal participant, in addition to the interests of land- or resource-owners common outside Indian country...
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