Coronavirus Throws Wrench Into Tribal Clean Energy Plans

By Keith Goldberg
Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.

Sign up for our Native American newsletter

You must correct or enter the following before you can sign up:

Select more newsletters to receive for free [+] Show less [-]

Thank You!

Law360 (May 15, 2020, 7:20 PM EDT) -- 2020 was going to be the year the Pueblo of Acoma took a major step toward energy independence and a clean energy future.

The tribe, based west of Albuquerque, New Mexico, planned to roll out its own electric utility in the culmination of a six-year process. It was poised to seek developers and investors for utility-scale solar projects that would help satisfy its electricity needs and allow it to sell power beyond its borders.

But those plans skidded to a stop on March 17 when tribal officials closed down the government and its main economic engine, the Sky City Casino & Hotel, because of the coronavirus crisis.

"Everything has come to a complete halt with the pueblo with our energy endeavors," Arvind Patel, who directs the pueblo's utility authority, told Law360.

Lawyers who work on power projects in Indian Country say similar stories are playing out with other tribes as they grapple with the COVID-19 pandemic. While some tribes continue to push their energy development plans forward, lawyers say they're noticing slowdowns in both development and financing deals and project work as many tribes focus on the more immediate health dangers the pandemic poses.

What's more, the widespread closure of casino and resort facilities is sapping many tribes of their primary revenue source. That will push energy development to the back of tribes' funding priority line, attorneys say.

"Right now, any tribal capital outlays in the energy sector ... have generally just been entirely suspended," said Jennifer Weddle, who co-chairs Greenberg Traurig LLP's American Indian law practice. "Projects really are tabled unless they are related to quarantine facilities and health care delivery in order for tribes to prepare for the pandemic."

For the Pueblo of Acoma, a new substation and nearby interstate transmission line helped drive its solar project plans.

"We have a lot of land, we have a lot of sun and we're relatively close to a transmission line," Patel said. "But all that right now has been put on hold."

Time and Cash Crunch

Even pre-pandemic, building clean energy projects in Indian Country was a lengthier, more complicated process than building projects on nonpublic lands, experts say.

"There's a lot of hurdles and extra layers of federal oversight," said John Lewis, who chairs the utility authority of the Gila River Indian Community, which is developing a 50-megawatt solar project on its lands just outside Phoenix.

On the regulatory side, developers must navigate the interplay of federal, state and tribal laws for issues including land use, environmental regulation and contracting. On the financial side, the tribes' tax-exempt status presents a challenge for developers who are counting on tax equity investors to help bankroll their projects. Tribal governments end up shouldering a lot of costs, either on their own or with U.S. government grants.

The pandemic adds a major layer of difficulty, attorneys say. For starters, many tribes simply don't have as much time to think about long-term project development while trying to protect public health and safety and other essential functions.

"The bandwidth just isn't there for the most part," said Quarles & Brady LLP energy and environmental partner Pilar Thomas, a former official at the U.S. Department of Energy's Office of Indian Energy Policy and Programs. "Finding the time to enter into negotiations or maintain negotiations, to maintain some type of effort and attention to big projects that require a lot of attention, that's just hard to do at this point."

That extends to any negotiations to secure federal funding for projects, Thomas said. For example, she said she isn't expecting much response to the DOE's latest offering of up to $15 million in grants to deploy energy technology on tribal lands. The agency put out the solicitation on March 27.

"I'd be shocked if they got any applications this time around," Thomas said. "You've got to have the bandwidth and capacity to pull together all the information that the DOE grant program requires."

Financial bandwidth is limited as well, with many tribal coffers being drained by the loss of gambling and hospitality revenue due to pandemic-related closures. Tribes have pressing needs like beefing up health care and maintaining other basic services that are pushing clean energy projects to the back burner, said Holland & Knight LLP energy and environmental partner Tara Kaushik, who frequently works on tribal energy projects.

The project slowdown is "going to last longer than nontribal areas because it will be a slow process after shelter-in-place orders are lifted for these tribal facilities to gain back their revenues," Kaushik said. "Most tribes are fighting right now to even get a piece of the CARES package and [Paycheck Protection Program] stimulus funding from the federal government, which is a slow and cumbersome process."

While the Pueblo of Acoma has received some CARES Act funding, Patel said the tribe's energy plans are being squeezed by the cash crunch. He said the tribe secured a multimillion-dollar loan to help form and operate its utility and planned to use the revenue the utility generated to pay back the loan.

With the utility rollout on hold indefinitely, Patel said the tribe had to cover the first loan payment, scheduled for this month, with funds from its own reserves. The next payment is due in November, he said.

"First and foremost, the uncertainty over when the government closures are going to be lifted is a concern, but I think a close second is finances," Patel said. "The time's coming when the tribe is going to run out of money."

Finding Ways To Push Forward

Coronavirus headwinds aren't stopping some tribes from advancing their clean energy plans.

Lewis of the Gila River Indian Community said the tribe hopes to finalize all of the developer agreements and contracts for its solar project by year's end. The goal is to break ground by 2022 and have the project up and running by 2023, Lewis said.

Meanwhile, on the Navajo Nation, which has been hit as hard as any tribe by the pandemic, tribal startup Navajo Power said May 7 that it had inked a deal with renewable developer sPower LLC to build a 200-megawatt solar project and secured $4.5 million in financing.

Maranda Compton, who co-coordinates Van Ness Feldman LLP's native affairs practice, said that tribal projects she's working on that have already started or are in the pipeline are continuing to progress despite the pandemic. The bigger impact of the coronavirus has been on potential deals, she said.

"Tribes get pitched on deals all the time, and I don't think deal flow is as strong as it usually is, although in our experience, quality projects and opportunities are continuing to move forward," Compton said.

How tribes structure their energy projects is key, experts say.

Lewis said the Gila River Indian Community inked a ground lease agreement that has developer Clenera LLC shouldering all of the solar project's capital costs and risk and gives the tribe the option to buy the project outright after seven years. That structure will help shield the project from any pandemic-induced financial shortfalls, Lewis said.

Lawyers say tribes may even be able to tap federal coronavirus relief funding to further clean energy goals, though they will have to navigate restrictions on how the money can be spent.

"If you can put some of these projects within the framework of COVID-19, they could qualify as eligible expenses," Compton said. "It really will come down to how tribes and tribal businesses are framing those investments."

Uncertain Path to Energy Independence

Lawyers and tribal officials say clean energy project development serves multiple purposes: meeting environmental and climate change goals, diversifying tribal economies beyond gambling and hospitality, and gaining tribes the ability to make more of their own energy and infrastructure choices.

"Under the shadow of the pandemic, that message is going to be amplified, because there is an independence component in having a tribal utility and developing projects how you want," Lewis said.

The big question is how much the pandemic will slow down tribal drives for energy independence.

Lewis said the Gila River Indian Community is looking closely at how it will be able to source equipment for future clean energy projects due to lingering coronavirus-fueled supply chain disruptions, and said he also worries about the availability of construction labor due to the pandemic.

"We don't see this going away anytime soon," Lewis said.

In New Mexico, the COVID-19 infection rate in northwestern counties surrounding the Pueblo of Acoma is still increasing, and state officials said those counties are exempt from an amended emergency order allowing for a gradual reopening across the state.

Patel said the pueblo will be just as cautious about reopening its doors, and restarting its energy development efforts.

"Long story short, we haven't hit our peak yet," Patel said. "In order for the leadership to make that decision, the trend has to be going downward, and it hasn't yet."

--Editing by Aaron Pelc and Emily Kokoll.

For a reprint of this article, please contact

Hello! I'm Law360's automated support bot.

How can I help you today?

For example, you can type:
  • I forgot my password
  • I took a free trial but didn't get a verification email
  • How do I sign up for a newsletter?
Ask a question!