Operation and Management Tribal Energy Development Douglas C. MacCourt, Ater Wynne LLP

1. Operation and Management Tribal Energy Development Douglas C. MacCourt, Ater Wynne LLP Chair Member and Former Chair Indian Law Group Executive Committee Ater Wynne LLP Indian Law Section dcm@aterwynne.com Oregon State Bar Association United States Department of Energy Western Area Power Administration 2015 Tribal Webinar Series March 25, 2015

2. Some Roles of Tribal Entities • Tribal utility authority • Cooperatives • Energy service companies • Joint ventures for project development • Small businesses for ongoing tribal employment

3. Common Structures for Tribal Energy • Section 17 Corporations • Tribal Government Entities • Tribal enterprises • Political subdivisions • Tribally Chartered Corporations • The Limited Liability Company • Formed under State or Tribal Law • State Law Corporations

4. Key Considerations • Ease or difficulty in setting up, running, and closing out the entity • Political involvement/control by the tribe a key consideration here • Choice of law – tribal or state? • Liability protections • Preserving tribal assets • Financing and tax considerations

5. Challenges and Solutions • Time critical? Tribal enterprise or LLC • Political/Financial independence? • State chartered corporations, LLC, • Section 17 (but tribe is sole shareholder) • Less time critical (e.g., 6-12 months)? • Section 17/LLC • Investor/financing concerns? • Section 17/LLC • Non-monetary concerns? • Not-for-profit

6. Value of Public Participation • Start with a Strategic Planning Process • Transparency, accountability, and good ideas from tribal members • Regular reporting to Tribal Council and members • The foundation of building capacity to • Make decisions • Obtain and maintain support • Identify and pursue opportunities

7. Sovereignty • Tribes are free to choose the form of governmental or non-governmental organization through which they do business. Mescalero Apache Tribe v. Jones, 411 US 145, 157 n 13, 93 SCt 1267 (1973). • As a general rule, state civil laws do not apply to Indians or their affairs within Indian country because either state laws are preempted by federal law, or state laws infringe on Indian self-rule. White Mountain Apache Tribe v. Bracker , 448 US 136, 100 SCt 2578, 65 LEd2d 665 (1980).

8. Value of Strategic Partnerships • Energy projects, and business ventures to promote them, require substantial expertise • Success requires a blend of public (e.g., governmental, non profit, NGO) and private sector (e.g., financing, legal, technical) support and experience • Partnerships help the tribe build the team needed to capture the opportunity and the tribal capacity to succeed

9. Many Responsibilities… • Initial project design and layout • Regulatory and permitting analysis • Negotiation of key agreements (e.g., land, water, fuel supply, offtake, interconnection and transmission, EPC, financing, shareholders) • Market analysis for power sales • Selection and management of advisors, EPC contractors • Community and government relations • Finance (projections, debt, investors, etc.) • Operation and maintenance plans and budgets

10. Understand the Risks • Input Risk • Construction Risk • Operational Risk • Output Risk • Sales/growth/reinvestment Risk **A key consideration for creating the right business structure is matching the tribal authority and support (financial, political and legal), to the risks of the venture.

11. The Balancing Act • Many business transactions do not rise to a level requiring review and approval by the entire council of a tribe (either elected or general council), but in many instances, the non-tribal party may insist on tribal approval or at least clear lines of authority and support. • At most, review and approval of contracts by tribal council may be necessary. • In many cases, transactions may be handled entirely by the relevant tribal enterprise or tribal corporation.

12. Tribal Law Governs • The power of a subordinate agency, enterprise or corporation is a matter of tribal law. Navajo Tribe v. Bank of New Mexico, 700 F2d 1285, 1288 (10th Cir 1993). • A non-Indian party's claim that it detrimentally relied on a subordinate tribal entity's apparent authority will not save an ultra vires contract.

13. Risk and Liability • Ownership and control of the entity comes at a price • Tribal enterprises and political subdivisions are completely controlled by the tribe • Section 17, LLC, state law and some tribal corporations generally are not controlled by the tribe • Corporate structures generally shield the business owners from liability for debts and other financial obligations of the business

14. Tax Considerations • Tax exempt status comes with certain entities • Section 17, tribal enterprises and political subdivisions • And not with others • State chartered corporations, LLC’s • While for others it is not clear • Tribal corporations • Federal tax rules may disallow tax exempt and taxable owners to participate in the same entity

15. Sovereign Immunity • Similar to the tribe’s tax status, the tribal attribute of immunity from lawsuits comes with some entities, and not with others • Section 17, tribal enterprises, political subdivisions: immune • State chartered corporations, LLC’s: not immune • Most investors, contractors, utilities and others will insist on a waiver of immunity • Waiver should be limited

16. Examples of Tribal Energy Entities • Direct tribal control: Campo Kumeyaay Nation; Southern Ute Energy Dept. • Tribal Enterprise: Navajo Tribal Utility Authority • Tribal corporation with state law LLC project company: To’Hajiilee Economic Development Corporation/Shandiin Solar LLC • Section 17: Energy Keepers Inc.; 4th Millennium Corporation • State Chartered Corporation: Forest County Potawatomi

17. Historical Paradigm • Energy facilities in Indian Country owned by non-tribal entities • Typical business model • Lease/royalty arrangement • Some exceptions, but very few • Tribal employment common, but management less common • Federal control over development of tribal energy resources

18. Shifting the Historic Paradigm • Tribal energy assessments and inclusion of energy in economic development planning • More vehicles for tribal investment • Greater emphasis on tribal management and labor in construction and operation • Greater tribal control over development of energy resources and less state control The choice of organizational or business model for the project can have a significant impact on the tribe’s ability to achieve these objectives.

19. For More Information Doug MacCourt Ater Wynne LLP 1331 NW Lovejoy St., Suite 900 Portland, OR 97209 503-226-8672 telephone 503-705-6031 cell 503-226-0079 facsimile dcm@aterwynne.com