By Janice Schneider and Stacey VanBelleghem

The Bureau of Indian Affairs (BIA) has proposed significant reforms to its current regulations for non-agricultural surface leases on Indian land.  76 Fed. Reg. 73784 (Nov. 29, 2011).  The proposed regulations include new provisions expressly governing Wind Energy Evaluation Leases (WELs) and Wind and Solar Resource (WSR) Leases and would streamline the leasing approval process while allowing additional flexibility that is lacking under the current regulatory framework.  The leasing reforms are consistent with the Administration’s emphasis on this type of renewable resource development, and would make it easier for projects to navigate the regulatory requirements for leasing Tribal and individually-owned Indian land.  The BIA developed the proposal in consultation with Tribes, and the regulations are intended to preempt the field of leasing on Indian lands.  The public comment period on the current proposal currently closes January 30, 2012.  BIA intends to publish the final rule in 2012.

This proposal would create a dramatic change in the way the BIA processes non-agricultural surface leases on Indian land.  For example:

  • While the existing regulations cover all non-agricultural surface land leases without distinction, the proposed regulations contain separate provisions for residential leases, business leases and WEELs /WSR leases.
  • The new regulations would also provide flexibility and greater Tribal self-determination in the valuation of the lease, and would provide additional clarity on taxation issues.  While current regulations require both that the rent agreed upon in a lease for Indian land must be at fair market value and that an appraisal must support this valuation, the proposed regulations would allow the Tribe to determine that the negotiated compensation for the lease of Tribal land is in the Tribe’s best interest even if it is not fair market value and would not require an appraisal unless the Tribe specifically requested it.  Additionally, the rule would clarify that improvements on trust or restricted lands are not taxable by States and localities, without regard to ownership.
  • The proposal also expands the permissible compensation schemes to include in-kind consideration, compensation that varies at different stages of the lease, compensation determined by percentage of income, or, in the case of WEELs and WSR leases, even bonuses.
  • An additional significant reform is that BIA proposes deadlines for its review and approval of leases—business leases and WSR leases must be approved within 60 days of receipt with a potential 30-day extension and WEELs must be approved within 20 days of receipt with a potential 30-day extension.  However, it is unclear how BIA would meet these approval deadlines given its obligations under the National Environmental Policy Act (NEPA) and other environmental laws.  The proposed regulations require applicants to provide BIA “[e]nvironmental and archeological reports, surveys, and site assessments” needed to comply with applicable environmental requirements, so it is possible that BIA intends for this to include applicant-prepared NEPA documents. 

The proposed leasing reforms clearly signal BIA’s intention to encourage renewable resource energy development on Indian lands, and the reforms provide the transparency of a dedicated process for these types of leases, additional flexibility, and timely review.  However, it will be important to follow how BIA addresses environmental review when and if the current proposal is promulgated.