Tribal Laws and Land Issues

Many Indian tribes own extensive blocks of land with significant solar resources. Tribal land provides solar developers (which can include the tribe or a business entity controlled by the tribe) with an opportunity to work with a single landowner to enter into a Solar Property Project Agreement securing all site control and related easements necessary to conduct a solar resource assessment and other studies and to construct, own, operate, and maintain a solar energy project.

Indian reservations are unique jurisdictional enclaves in which federal and tribal laws apply. Federal and tribal laws govern leases, easements, and other agreements for use of tribal land within Indian reservations. In addition, as governments, Indian tribes exercise significant regulatory control over use of tribal land and Indian reservation land generally. Federal laws of general application, such as federal environmental, energy, and tax laws, and some state laws also apply to solar energy project developers on tribal land. This chapter provides a brief overview of issues affecting solar energy project development on tribal land.

I. Solar Property Project Agreements on Tribal Land. Land ownership, which varies from reservation to reservation, may include a matrix of land owned by the United States in trust for tribes (“tribal land”) and individual Indians and land owned in fee by tribes, individual Indians, and non-Indians. This section focuses on tribal land, although there may be separate consent and tribal law issues relating to land owned in fee by a tribe as well. Even with tribal consent, tribal land can be sold, leased, encumbered by an easement, or used as security for financing only as authorized by federal Indian law and applicable tribal law.

Under 25 U.S.C. section 415(a), an Indian tribe, as lessor, can lease tribal land for a term not to exceed 25 years; with the consent of both parties, the lease may include provisions authorizing renewal for one additional term not to exceed an additional 25 years. Specific tribes listed in section 415(a) can also lease tribal land for up to 99 years. For leases authorized by section 415(a), the Bureau of Indian Affairs (“BIA”) will defer to the tribes for leases on tribal land. 25 C.F.R. § 162.540(b). Through an amendment to section 415(h), enacted by Congress in 2012, all Indian tribes may lease tribal land for up to 75 years without BIA approval, once the BIA approves tribal leasing regulations. Several tribes have already adopted such regulations, with BIA approval, and more are expected to do so. Leases authorized by section 415 are for surface use and do not authorize exploration, development, or extraction of mineral resources.

Key federal environmental laws the BIA must comply with before approving leases of tribal land and taking other action include the National Environmental Policy Act (“NEPA”), the National Historic Preservation Act (“NHPA”), and the Endangered Species Act (“ESA”). Under NEPA, the BIA must prepare an environmental impact statement before approving a lease of tribal land or taking other action, unless a categorical exclusion applies (where the BIA’s action is of a type that will not have significant environmental impact, individually or cumulatively) or the BIA concludes after preparing an environmental assessment that its action will not have a significant impact on the environment. Under section 106 of the NHPA, the BIA must take into account impacts its actions may have on any property listed or eligible for listing on the National Register of Historic Places, including properties of traditional religious and cultural importance to an Indian tribe, and must consult with tribes and other interested parties in the development and evaluation of measures to avoid, minimize, and mitigate any adverse impacts of its action on the characteristics that make such properties eligible for listing on the National Register of Historic Places. Section 7 of the ESA requires the BIA to consult with either the U.S. Fish and Wildlife Service or the National Marine Fisheries Service, and in some cases both, if its action may affect species or designated critical habitat of species listed as threatened or endangered under the ESA. Federal laws of general application, such as the Clean Water Act and Clean Air Act, generally apply on tribal land; however, the Ninth Circuit has ruled that the citizen’s suit provision of the Clean Water Act does not contain an implied waiver to tribal sovereign immunity. Therefore, in cases where the tribe is an indispensable party to a lawsuit, the lawsuit cannot proceed unless tribe waives immunity. However, the reasoning in that case is inconsistent with an Eighth Circuit ruling concerning the Resource Conservation and Recovery Act and a Tenth Circuit ruling on the Safe Drinking Water Act. Compliance with these and other federal environmental laws can delay project development and result in measures to avoid, minimize, and mitigate project impacts.

Tribal government corporations operating under charters issued by the Secretary of the Interior under 25 U.S.C. section 5124 can lease tribal land for 25-year maximum terms without BIA approval. Leases authorized by section 5124 cannot include an option extending the 25-year base term.

For purposes of protecting project solar resources from being disturbed by development on other tribal land, it may be appropriate to combine a lease of tribal land with an “encumbrance” on other tribal land under 25 U.S.C. section 81. A section 81 encumbrance of tribal land for seven years or more must be approved by the Indian tribe and the BIA.

A lease may address access that a solar project developer needs to leased premises by roads or other infrastructure. Roads or other access methods within the leased premises do not require a separate right-of-way grant under 25 C.F.R. part 169. To the extent a solar project developer needs a right-of-way over nontribal trust land owned by individual Indians or tribal lands of an adjoining Indian reservation, the BIA may grant rights-of-way across tribal and individual Indian trust land with the owner’s consent. Before issuing a right-of-way, however, the BIA must comply with federal laws governing federal agency actions affecting the environment. In response to a 1997 U.S. Supreme Court case limiting tribal jurisdiction within a BIA-issued right-of-way, some tribes refuse to consent to BIA-issued rights-of-way. These tribes have preferred to approve rights-of-way in the form of “linear leases” under section 415, discussed above. Generally, tribes exercise greater regulatory control over activities conducted on tribal land under a lease.

II. Key Considerations.

A. Taxation and Regulatory Authority. In addition to being landowners, Indian tribes are governments that may exercise significant tax and regulatory authority over activities on tribal and other reservation land. A tribe does not waive its governmental regulatory authority by entering into contracts for development of tribal land and resources. A developer should carefully review tribal laws and regulations to determine their effect on a solar energy project. When appropriate, a developer can request that a tribe adopt new tribal laws or amend existing tribal laws to facilitate financing and other aspects of a solar energy project on tribal land.

Nontribal project developers may be subject to applicable state and tribal taxes. Regulations adopted by the BIA applicable only to leases issued under 25 U.S.C. section 415 indicate that state and local taxes do not apply to leasehold interests of lessees of tribal land. Prior to the issuance of these regulations, various federal court cases came to different conclusions, and it is too early to determine what practical effect the BIA’s new regulations will have. Careful review should be conducted to determine whether a Solar Property Project Agreement or other agreements can be designed to avoid or minimize the risk of double taxation. In some cases, Indian tribes are willing to abate tribal taxes to the extent necessary to avoid or minimize the economic impact of double state-tribal taxation.

Federal law affords accelerated depreciation for certain investments on tribal land. Some states grant credits against state taxes or abate state leasehold taxes and certain other state taxes for projects on tribal land. Other federal agencies, including the U.S. Department of Energy Office of Indian Energy, and other entities provide funding and financing to support tribal energy development.

Although federal and tribal laws play a dominant role in energy development on tribal land, state laws may also impact these projects. For example, if access to a state highway is needed, that must be obtained in the manner provided under state law. Nontribal developers and their nontribal employees, contractors, and suppliers may be subject to a variety of state laws.

B. Water Rights. Certain solar technologies involve significant use of water. For many purposes, tribal water rights are appurtenant to tribal land, and, in some cases, the holder of those water rights may have priority. Except for acts of Congress approving certain Indian water right settlements authorizing leases of tribal water rights apart from tribal land, the most common way to secure a right to use tribal water is through a lease of tribal land to which the tribal water right is appurtenant. Depending on local hydrology, political considerations, and other factors, including necessary transmission lines and rights-of-way, water rights secured under state law may be available for use by a solar project on tribal land.

C. Cultural Resources. In addition to BIA compliance with NHPA section 106 in approving leases of or issuing rights-of-way on tribal land, the Native American Graves Protection and Repatriation Act and other federal laws establish procedures and permitting requirements that must be followed if human remains, funerary objects, sacred objects, or archaeological resources are intentionally or inadvertently encountered before or during project development on tribal land (and federal land). Many Indian tribes have tribal laws that deal with these matters on tribal land.

D. Dispute Resolution. As governments, Indian tribes have sovereign immunity. This means an Indian tribe cannot be sued in any court without the express consent of Congress or the tribe itself by appropriate tribal government action. Most tribes are willing to waive tribal sovereign immunity on a limited basis to promote significant tribal economic development projects. A tribal sovereign immunity waiver must be approved by a tribe in accordance with applicable requirements of tribal law, and any action or proceeding brought under such a waiver likewise must comply with applicable requirements of tribal law, including any requirements for notice to specified tribal officers before commencement of an action or proceeding.

A dispute resolution clause in an agreement with an Indian tribe typically includes a provision designating the court or courts authorized to exercise jurisdiction over a dispute with the tribe. These clauses should be carefully reviewed, as federal and state courts often will not have jurisdiction over a dispute with an Indian tribe, despite a forum selection clause. Developers are often reluctant to agree to have such disputes heard in a tribe’s tribal court.

To address this dilemma, many Indian tribes will agree to a dispute resolution clause designating binding arbitration as the exclusive means of resolving disputes. Although a binding arbitration clause leaves questions regarding which court can enforce the promise to arbitrate and can enforce, modify, or vacate an arbitration award, well-drafted agreements to resolve disputes by binding arbitration and well-drafted sovereign immunity waivers resolve some of the most challenging dispute resolution issues in tribal Solar Property Project Agreements.