Native American Indian tribes own millions of acres of land in the United States, and it appears the tribes have become more eager to exploit their untapped energy resources. An estimated 890 million barrels of oil and natural gas liquids and 6 trillion cubic feet of natural gas are thought to exist beneath tribal land in the continental United States and Alaska. Over the past 20 years, Indian lands have contributed approximately 11% of the nation's onshore oil and gas production. Yet, according to recent surveys, only 25% of known reserves on tribal lands have been developed. Difficulties in structuring and completing transactions have often led to a falloff in developer and investor pursuit of unique opportunities in concert with the tribes. Understanding and successful navigation of these issues is critical to unleashing energy potential on tribal lands. As a largely untapped resource, tribal lands are uniquely situated. But contrary to popular belief, opportunities on Indian lands extend beyond raw fuel production. Given the often remote locations of reservations, with few prohibitive land-use conflicts, and proximity to major pipeline routes and transmission grids, the potential for siting power plants is substantial. Furthermore, many tribes are sitting on renewable energy opportunities. The Department of Energy (DOE) estimates at least 61 reservations have renewable energy resources in quantities sufficient to support central-station generation. With so much potential, why have these resources, for the large part, remained untouched? New energy legislation There are longstanding advantages for companies that partner with Indian tribes in energy development. Federal tax incentives for private investment on Indian reservations allow for accelerated depreciation of a company's assets, and tax credits for companies that employ Native Americans. In addition, existing legislation, like Title XXVI (Indian Energy Resources) of the Energy Policy Act of 1992, has authorized funding for renewable energy projects located on tribal land. Historically, however, legal complexity and a lengthy process to obtain federal approval have discouraged outside investment in tribal energy projects. Fortunately, after five years in the making, President Bush signed the Indian Tribal Energy Development and Self-Determination Act (ITEDSDA, or Title V of the Energy Policy Act of 2005). This creates within the DOE an Office of Indian Energy Policy, authorized to receive $20 million annually until 2016, to provide grants to tribes that carry out, among other things, planning and management of tribal electrical generation, transmission and distribution facilities ITEDSDA also directs the Secretary of the Interior to create an Indian Energy Resource Development Program to provide grants and low-interest loans to tribes and their energy development partners who utilize and develop tribal energy resources. Finally, the act loosens some traditional regulatory red tape by streamlining the federal approval process for new energy projects on tribal lands. Current tribal energy development initiatives include oil, gas, coal, coalbed methane, hydro-electric generation, liquefied natural gas and renewables projects. The Blackfeet Indian Nation of northwestern Montana recently opened 150,000 acres of its reservation to gas exploration and production, which could produce up to 30 billion cubic feet of gas per acre. According to the U.S. Geological Survey, in more than 80 years of commercial production, wells on the Blackfeet Reservation have produced 1.1 trillion cubic feet of gas and 440 million barrels of oil. In 2001, the Northern Ute Tribe opened 84,000 acres of mineral-rich land in Utah's Uinta Basin, including 17.5 billion cubic feet of natural gas, to oil and gas development. A successful exploration and development partnership with Dominion Exploration & Production Inc., led to the tribe's May 2005 establishment of a privately owned energy firm, Ute Energy LLC. Ute Energy is now partnered with Questar Corp., Fidelity Investors Management, Bill Barrett Corp. and Berry Petroleum Co. in the development of 30 producing oil and gas wells, currently averaging 500 barrels of oil and 7.5 million cubic feet of gas per day. Plans have been made to commence the first stage of a four-year oil and gas exploration and drilling effort targeting an additional 236,000 acres of the Northern Ute's reservation, 150 miles east of Salt Lake City. Other successful upstream tribal projects include: • The Southern Ute Tribe of Colorado's natural gas-development initiatives and energy portfolio is worth more than $2 billion, including partnerships with Kinder Morgan Energy Partners and Trident Exploration Corp. • The Jicarilla Apache Nation and partner John D. Jones Engineering Inc. are planning an oil processing facility on the petroleum-rich Jicarilla Reservation in New Mexico. • The Three Affiliated Tribes (Arikara, Mandan and Hidatsa) in North Dakota and their partner, Advanced Resources International, are collaborating to develop an integrated, non-invasive procedure to assess oil exploration potential on the Fort Berthold Indian Reservation in western North Dakota. Issues unique to tribal energy Currently there are more than 560 federally recognized tribes in the United States. Over the course of the nation's history, the federal government's relationship with Indian tribes has been defined and modified by treaties, executive orders, court decisions, issue-specific legislation and assorted regulations. The result is a body of federal and tribal Indian law that presents a number of unique issues to developers. One of the most fundamental principles of federal Indian law is the federal government's trust responsibility to tribes. This fiduciary obligation is manifest in, among other things, the federal responsibility to manage trust assets on behalf of tribes. Currently, trust asset management involves some 45 million acres. The government's role is more than just an asset manager. Federal legislation requires that the Secretary of the Interior approve encumbrances of trust and restricted land and says that certain types of contracts with tribes are not valid unless they are approved by the Secretary. Typically, all energy and related development proposals, from new building construction to pipeline rights of way, require secretarial approval. Additionally, Indian lands cannot be accessed without permission. Finally, federal approval of agreements affecting Indian lands is a "major federal action" that triggers environmental review under the National Environmental Policy Act. A tribe may choose to contract itself, or it may separate its governmental and business functions, giving control of its business activities to a tribal-related entity. The nature of the entity with whom the investor is dealing affects its rights and remedies. Business due diligence should include a review of the tribal entity's organizational documents and tribal law (including its custom and tradition). Typically, a tribe will adopt resolutions specifically authorizing a business transaction and granting authority to execute and deliver related documents. Adoption of authorizing resolutions is important since tribal leaders may not have authority to act absent specific action by the tribe's governing body. Opinions of counsel for the tribe regarding the organization of the tribe, the organization of the tribal business and the respective power and authority of each, can add more assurance. As dependent sovereign nations, tribes enjoy immunity from suit. Absent an effective waiver of immunity, a tribe may not be sued in tribal, state or federal court. As a rule, a tribe's immunity from suit extends to tribally owned businesses and to business entities formed under tribal law. Any waiver of immunity must be unambiguous and "unequivocally expressed." Tribes regard their sovereign immunity as an essential feature of their sovereign status, and thus may resist waiving it. In such cases, if a transaction is to be consummated, middle ground must be found and a compromise reached. Investors in energy development projects located on Indian lands are well advised to be familiar with tribal custom and law as well as federal law related to Indian tribes. Familiarity with each is the key to unlocking natural resources on Indian land. M Nancy J. Appleby, Gregory G. Hawn and Nancy A. Wodka are partners in the Washington, D.C., office of law firm Bracewell & Guiliani LLP. They represent clients with domestic, foreign and tribal energy projects.