Indian Energy Development: Poor Management by BIA Has Hindered Energy Development on Indian Lands
Released: 2015-06-15T00:00:00

Letter

Background

Domestic energy production, including Indian energy resources, contributes to the U.S. economy and national security, providing energy for transportation, manufacturing, and residential use. More than 90 percent of domestic energy consumption in 2013 came from fossil or renewable sources. Fossil energy comes primarily from crude oil, natural gas, and coal. Renewable energy comes from a variety of sources, including wind, solar, hydroelectric power, geothermal, and biomass. Electricity generation using renewable energy can range from facility- and community-scale production—such as rooftop solar panels or a wind turbine to power a community center—to utility-scale production of hundreds of MWs of electricity.

Most of this energy was produced from non-Indian resources, but Indian energy resources hold significant potential for future development. For example, natural gas and crude oil are found in a variety of geological formations, including shale. Some Indian tribes and their members own resources located in known shale plays (see fig.1).

Development of Indian energy resources is a complex process that may involve a range of stakeholders, including federal, tribal, and state agencies. BIA, through its various regional and agency offices, Division of Real Estate Services, Division of Land Titles and Records, and Division of Natural Resources has primary authority for managing Indian energy development (fig. 2 shows BIA regions and the number of associated agency offices).

Other federal agencies and offices, including BLM, IEED, and FWS, may also have a role in the development of Indian energy resources. For instance, IEED’s Division of Energy and Mineral Development serves tribes by assisting with the exploration, development, and management of their energy resources—fossil fuels and renewable.

While the specific steps and order of events listed below vary based on the type of resource being developed, location of development, and ownership of the resource, energy development generally includes the following activities: Exploration. To develop energy resources, developers and operators must locate a suitable resource. To identify potential oil and gas resources, most operators use seismic methods of exploration. For renewable projects, developers conduct a feasibility assessment to determine the viability of the project, including an evaluation of the market area to determine demand for power, availability of interconnection with the grid, and financing opportunities. During the exploration phase, a number of permits or authorizations may be required. For example, permitting requirements can include seismic exploration permits, permission to survey, ROW agreements, archeological and cultural surveys, tribal access permits, and environmental assessments.

Preleasing. Operators must identify ownership of surface and/or subsurface resources. BIA maintains surface and mineral ownership records, and operators generally request a title status report from BIA’s Land Titles and Records Office to verify ownership of land and resources. A title status report is issued after BIA examines land titles and identifies the legal description of a tract of Indian land; current ownership, including any applicable conditions, exceptions, restrictions, or encumbrances on record; and whether the land or resource is in trust, restricted, or fee status. Trust and restricted resources are held for the beneficial interest of the tribe or an individual Indian and cannot be transferred or leased without approval of the Secretary of the Interior, who has generally delegated this authority to BIA. Some tribal boundaries include a patchwork of these ownership patterns, along with parcels of land and resources owned by the federal government, states, and counties, intermingled together—giving land ownership maps a “checkerboard” appearance (see fig. 3).

Leasing. The operator or developer must acquire a lease for the use of the surface and/or the right to drill for oil and gas resources. There are several ways in which Indian oil and gas resources can be leased. For example, oil and gas resources can be nominated for lease by operators, the tribe, or an individual Indian owner. Then, BIA reviews nominated oil and gas resources to determine ownership and in some cases, BLM may assist with identifying ownership of proposed parcels. If the resources are not already leased, BIA may advertise and conduct competitive lease sales where operators can bid on nominated leases. BIA reviews the bids, identifies the highest bidder, and notifies the operator whether its bid was accepted. Tribes and individual Indians can, in some cases, lease their own oil and gas resources. For energy development that requires use of surface lands, leases for use of the lands are generally submitted to BIA for review, after ownership has been determined.

Permitting and other government actions. Multiple permits and other approvals can be required throughout the development process, and types of permits vary by project. For example, BLM issues drilling permits to operators developing Indian oil and gas resources—after receiving BIA concurrence for approval of the permit. In addition, operators and developers may have to obtain other types of permits from other federal agencies. For example, an oil and gas operator may be required to obtain a permit from EPA for air emissions, and a developer of a wind project may be required to obtain a permit from FWS for unavoidable bird deaths. Other approvals that may be needed for energy development include the granting of a ROW, which is generally obtained through BIA approval.

Indian tribes may also have their own set of laws and regulations governing energy development. For instance, tribes may require operators to enter into tribal business license agreements and tribal employment rights ordinance agreements.

State agencies have general authority to regulate natural resources within state boundaries if the resources are located outside Indian country. States do not have authority to regulate Indian resources located on Indian country unless Congress has authorized this in a federal statute. One such statute is the Act of Aug. 4, 1947, 61 Stat. 731, sec. 11 (authorizing regulation of resources on “ll restricted lands of the Five Civilized Tribes under Oklahoma oil and gas conservation laws” if approved by the Secretary of Interior). Indian country is all land within the limits of any Indian reservation, including rights-of-way; all dependent Indian communities within the borders of the United States; and all Indian allotments the Indian titles to which have not been extinguished, including rights-of-way. 18 U.S.C. § 1151. statute.defer to state well spacing, well completion, and production rules and operators generally obtain a state drilling permit regardless of ownership.

In addition, according to Interior officials, BIA and BLM generally Finally, for a utility-scale renewable energy project, a developer may also need to execute transmission and power purchase agreements— agreements with a utility to connect the project to the grid and to purchase the energy created by the project.

Environmental compliance and other requirements. Indian energy development is generally subject to federal environmental and other laws that apply to both federal and Indian resource development, but not to private resource development. In particular, under the National Environmental Policy Act (NEPA), federal agencies are required to evaluate the likely environmental effects of certain major federal actions by using an environmental assessment or, if the projects likely would significantly affect the environment, a more detailed environmental impact statement.and other documents needed to develop Indian energy resources. These approvals are generally considered “major federal actions.” BIA, as the responsible surface management agency for Indian lands, often takes the lead in reviewing the NEPA analysis, though the analysis is reviewed by multiple agencies, and the public is provided opportunities to provide comment on the analysis. In addition, Indian energy development projects Federal agencies review and approve the leases, permits, are subject to National Historic Preservation Act requirements, and, under some circumstances, require an Endangered Species Act (ESA) consultation with FWS. Also, as noted above, operators may be required to obtain a permit from EPA for air emissions. Under section 7 of the ESA, federal agencies must ensure that any action they authorize, fund, or carry out—including approval for Indian energy development activities—is not likely to jeopardize the continued existence of a species protected under the act.

Development. After leases, permits, and other authorizations are obtained, the construction of the oil and gas well or renewable project can begin.

Shortcomings in BIA’s Management and a Variety of Other Factors Have Hindered Indian Energy Development

A variety of factors, including shortcomings in BIA’s management of Indian energy development, have hindered development of Indian energy resources, according to some of the literature we reviewed and several stakeholders we interviewed. In particular, BIA does not have comprehensive data to identify ownership and resources available for development, does not have a documented process or data to track and monitor its review and response times, and some offices do not have the skills or adequate staff resources to effectively review energy-related documents. Additional factors, generally outside of BIA’s management responsibilities, have also hindered Indian energy development, including (1) a complex regulatory framework, (2) fractionated ownership interests, (3) tribes’ limited access to capital and federal tax credits, (4) dual taxation by states and tribes, (5) tribal capacity, and (6) infrastructure limitations.

BIA Does Not Have Comprehensive Data Identifying Ownership and Use of Indian Resources

BIA does not have the data it needs to verify ownership of some oil and gas resources, easily identify resources available for lease, or easily identify where leases are in effect. The ability to account for Indian resources would assist BIA in fulfilling its federal trust responsibility, and determining ownership is a necessary step for BIA to approve leases and other energy-related documents. In addition, Interior’s Secretarial Order 3215 calls for BIA to maintain a system of records that identifies the location and value of Indian resources and allows for resource owners to obtain information regarding their assets in a timely manner. Further, according to Interior guidance, the determination of the legal boundaries of Indian trust lands is essential to ensure that property and resources are properly accounted for and protected.

However, in some cases, BIA cannot verify ownership because federal cadastral surveys—the means by which land is defined, divided, traced, and recorded—cannot be found or are outdated. For example, BIA officials told us of an instance of Indian minerals under development without an approved lease because BIA’s ownership data were outdated and, therefore, not reliable to allow the agency to verify ownership. Without an approved lease, BIA officials told us the operator could not make royalty payments to the Indian beneficiary, and the royalty funds were held in an escrow account for at least 8 months. BIA officials told us that, as of April 2015, BLM started the survey, and the agency approved the lease.

According to an Interior official, the absence of a cadastral survey is not an isolated event. The official said he was aware of similar scenarios throughout Montana, North Dakota, Oklahoma, and Wyoming; however, the extent of this deficiency is unknown because neither BIA nor BLM maintains an inventory of Indian cadastral survey needs, as called for by Interior guidance issued annually since 2008. BLM historically maintained this information in its Cadastral Automated Request System (CARS), but a BLM official told us the system has not been fully maintained or consistently used since 2011. Without an inventory of needs, BIA does not know the magnitude of the problem or how to prioritize and target its limited resources.

In addition, BIA does not have geographic information system (GIS) mapping data identifying resource ownership and use of resources, such as existing leases. Interior guidance identifies that efficient management of oil and gas resources relies, in part, on GIS mapping technology because it allows managers to easily identify resources available for lease and where leases are in effect. However, BIA’s database for recording and maintaining historical and current data on ownership and leasing of Indian land and mineral resources—the Trust Asset and Accounting Management System (TAAMS)—does not include a GIS mapping component.

According to a BIA agency official, without a GIS component, the process to identify transactions such as leases and ROW agreements for Indian land and resources can take significant time and staff resources to search paper records stored in multiple locations. For example, in response to a request from a tribal member with ownership interests in a parcel of land, BIA responded that locating the information on existing leases and ROW agreements would require that the tribal member pay $1,422 to cover approximately 48 hours of staff research time and record duplication costs. In addition, officials from a few Indian tribes told us that they cannot pursue development opportunities because BIA cannot provide the tribe with data on the location of their oil and gas resources. According to a 2012 report, an inventory of Indian resources can provide a road map for expanding development opportunities.

According to Interior’s 2014-2015 performance plan, it was to incorporate a GIS mapping component into TAAMS in fiscal year 2014. However, BIA officials told us the agency faced competing priorities and has delayed the incorporation of the GIS mapping component to fiscal year 2015. Without easily accessible data, such as provided in GIS mapping technology, BIA will continue to face challenges to properly manage Indian energy resources and tribes could miss out on development opportunities.

BIA Does Not Have a Documented Process or Data to Track Its Review and Response Times

BIA review and approval is required throughout the development process, including the approval of leases, ROW agreements, and appraisals; however, BIA does not have a documented process or the data needed to track its review and response times. In 2014, an interagency steering committee that included Interior identified best practices to modernize federal decision-making processes through improved efficiency and transparency. The committee determined that federal agencies reviewing permits and other applications should collect consistent data, including the date the application was received, the date the application was considered complete by the agency, the issuance date, and the start and end dates for any “pauses” in the review process. The committee concluded that these dates could provide agencies with greater transparency into the process, assist agency efforts to identify process trends and drivers that influence the review process, and inform agency discussions on ways to improve the process.

However, BIA does not collect the data the interagency steering committee identified as needed to ensure transparency and, therefore, it cannot provide reasonable assurance that its process is efficient. A few stakeholders we interviewed and some literature we reviewed identified that BIA’s review and approval process can be lengthy and increase development costs and project development times, resulting in missed development opportunities, lost revenue, and jeopardized viability of projects. For example, in 2011, the President for the Rosebud Sioux Tribe in South Dakota, reported that it took 18 months for BIA to review a wind lease. According to the developer of the project, the review time caused the project to be delayed and resulted in the project losing an interconnection agreement with the local utility. Without this agreement, the project has not been able to move forward, resulting in a loss of revenue for the tribe.

In another example, in 2014, the Acting Chairman for the Southern Ute Indian Tribe reported that BIA’s review of some of its energy-related documents took as long as 8 years. Specifically, as of April 30, 2014, the tribe had been waiting for at least 5 years for BIA to review 81 pipeline ROW agreements—11 of the 81 ROW applications had been under review for 8 years. According to the official, had these ROW applications been approved in a timely manner, the tribe would have received revenue through various sources, including tribal permitting fees, oil and gas severance taxes, and royalties. The official noted that, during the period of delay, prices for natural gas rose to an historic high but had since declined. Therefore, the official reported that much of the estimated $95 million in lost revenue will never be recovered by the tribe.

In yet another example, BIA took more than 3 years to review and approve a lease for a proposed wind project and, according to a tribal official, the lease was only reviewed and approved after multiple calls and letters from the tribe to BIA headquarters. Long review times can contribute to uncertainty about the continued viability of the project because data used to support the economic feasibility and environmental impact of the project can become too old to accurately reflect current conditions. The Commission on Indian Trust Administration and Reform reported that undue delays in BIA’s review process can have a direct negative impact on economic development and noted that willing developers have walked away from a lease or other agreement because the process takes too long.

BIA has taken some steps to improve its collection of data on review and response times for some leases. Specifically, BIA determined that it did not have a standard approach to track activities associated with the review of leases, permits, and applications for the development of Indian resources. Without this information, the agency could not monitor its performance to meet regulatory processing times identified in its 2012 regulations or the status of applications. To address this concern, in 2014, the agency developed the Realty Tracking System. According to BIA officials, this system provides the data needed to track reviews of surface leases. However, the system does not track information for oil or gas leases or other key review activities associated with energy development, such as ROW agreements, and does not include comprehensive data on existing surface leases under review.

According to BIA officials, the lengthy review times can be attributed, in some instances, to incomplete lease or application packages submitted to the agency. However, without key data to identify the time it has taken to process energy-related documents and a documented process to track review times, BIA cannot verify the extent to which incomplete lease or application packages contribute to lengthy reviews. It also cannot ensure that documents are moving forward in a timely manner or determine if its efforts to improve the process are effective.

Some BIA Offices Do Not Have Staff with the Skills Needed to Effectively Manage Indian Energy Development

Some BIA regional and agency offices do not have staff with the skills needed to effectively evaluate energy-related documents or adequate staff resources, according to a few stakeholders we interviewed and some of the literature we reviewed. For example, Interior’s IG reported in 2014 that a BIA agency office in Colorado does not have sufficient staff qualified to effectively administer oil and gas operations. In 2013, the Commission on Indian Trust Administration and Reform reported that Interior does not have adequate resources to meet Indian leasing demands for oil and gas development. Several stakeholders, including Interior officials, also highlighted this concern and further identified inadequate staff resources as a contributing factor in lengthy review times and a hindrance to development of Indian energy resources. For instance, Interior officials told us that the number of BIA personnel trained in oil and gas development is not sufficient to meet the demands of increased development. In another example, a BIA official from an agency office told us that leases and other permits cannot be reviewed in a timely manner because the office does not have enough staff to conduct the reviews. Further, the Chairman of the Shoshone-Bannock Tribes reported that one of the major impediments to the success of its wind project is insufficient BIA staff resources to review and approve environmental documents required under NEPA.

A Variety of Factors Generally Outside of BIA’s Control Have Hindered Indian Energy Development

A variety of factors generally outside of BIA’s control have also hindered Indian energy development, according to some of the literature we reviewed and stakeholders we interviewed, including (1) a complex regulatory framework with multiple jurisdictions, (2) fractionated land and mineral ownership interests, (3) tribes’ limited access to capital and federal tax credits, (4) dual taxation by states and tribes, (5) tribal capacity, and (6) infrastructure limitations.

Complex Regulatory Framework with Multiple Jurisdictions

According to Interior officials, while the potential for oil and gas development can be identical regardless of the type of land ownership— such as state, private, or Indian—the added complexity of the federal process stops many developers from pursuing Indian oil and gas resources for development. In addition, the development of Indian energy resources can be governed by multiple federal, tribal, and, in certain cases, state agencies and also can be affected by states’ regulation of oil and gas resources on adjacent state or private lands.several stakeholders and some literature we reviewed, this framework can involve significantly more steps than the development of private and state resources, increase development costs, and add to the timeline for According to development.investment firm we interviewed, an oil or gas well that develops Indian resources generally costs almost 65 percent more for regulatory compliance than a similar well developing private resources.

In 2013, the Coalition of Large Tribes passed a resolution calling for federal agencies to adopt policies declaring that Indian lands are not public lands and should not be managed according to public interest standards, but rather managed by Indian tribes for the benefit of their members.

According to an Interior report to Congress, because Section 7 of the ESA applies to the development of Indian resources, Indian energy development often requires costly surveys and other forms of data collection that are not always required for projects on private lands. In addition, as part of the NEPA process, Indian energy development may be open to a public comment period—allowing the public to present concerns for consideration before BIA approves leases and permits. Several stakeholders highlighted the additional costs required for NEPA compliance, most often paid for by the developer or operator, and the uncertainty associated with public opposition and comments received during the NEPA process as factors that can cause a developer to avoid Indian energy resources and choose to develop non-Indian resources that do not require federal agency action. Interior officials told us that NEPA compliance reviews significantly increase the cost of conducting operations on Indian lands and, as a result, projects are moved to adjoining state or private lands where NEPA compliance is not required. A few stakeholders also expressed concern that BLM’s recent hydraulic fracturing rule applies to Indian oil and gas development, adding more federal regulation to development activities on Indian resources that are not generally applicable to private or state resources.

Indian oil and gas development can also be subject to higher fees than those for non-Indian resources. For example, development of Indian oil and gas resources is subject to BLM’s $6,500 drilling permit fee. In comparison, development of private and state oil and gas resources may be subject to state drilling permit fees, which vary by state; for example, drilling permits in Montana cost $150 or less. Interior officials told us that some Indian oil and gas resources are located in areas that offer marginal economic returns, and development in those areas can be affected by BLM’s permitting fee. In addition, in 2015, a research affiliate from the Harvard Project on American Indian Economic Development noted that the permitting costs to develop Indian energy resources are higher than the development of resources elsewhere, thus creating an environment of uncertainty and contributing to lackluster economic development.

Fractionated Land and Mineral Ownership Interests

Fractionated Ownership Interests Fractionated ownership interests for Indian resources are a result of the application of state law by the General Allotment Act of 1887, subsequent federal laws, court decisions, and administrative rulings. Allotted tracts of land are passed down through generations and, as generations pass, ownership interests are fractionated among heirs, but the land is not physically divided. With each generation, ownership interests exponentially grow. To consolidate ownership of highly fractionated trust lands, in 2012, Interior created a land buy-back program for tribal nations to implement the land consolidation component of the Cobell v. Salazar settlement. This settlement provides $1.9 billion to be used to purchase and consolidate fractionated interests in trust or restricted land. Consolidated parcels will be transferred to tribal governments for uses benefiting the tribes.

Some Indian resources have highly divided, or fractionated, ownership interests that can result in more costly and longer development times compared with non-Indian resources that are not fractionated. According to Interior officials, fractionated ownership creates a problem for leasing because federal statutes require written consent from at least a majority of the “undivided interest” holders of an allotment before various activities are authorized or permitted to occur on an allotment, such as surveying, geophysical permits, ROW agreements, and mineral lease approval. In most instances, the proponent of the activity, such as a developer, is responsible for obtaining the required consents and providing proof of consent to the federal agency. In the case of competitive bid sales, BIA will ordinarily obtain the necessary consents; however, for negotiated mineral leases, the would-be lessee is required to obtain the consents needed. According to some literature we reviewed, these allotted parcels of land have hundreds or even thousands of owners with interests in a single parcel. According to some literature, fractionation raises the cost of developing Indian energy resources, reduces the potential benefits for each individual owner, and hinders development of some resources.

Access to Capital and Federal Tax Credits

Some tribes face difficulty accessing the capital needed to undertake energy development projects, which can also hinder development of their resources. For example, a 2013 article found that tribes have difficulty establishing wind farms because they neither have access to the initial capital needed to start the project nor the tax incentives to keep it going. Specifically, because federally recognized Indian tribes are sovereign legal entities and not subject to federal income tax, Indian tribes also have limited opportunities to take advantage of federal tax credits to develop their own resources, such as federal production tax credits. In September 2014, we found that federal activities, such as tax credits for renewable energy producers, were factors influencing a 30-fold increase and a 19-fold increase in production of electricity from wind and solar energy, respectively, from 2000 to 2013. According to some of the literature we reviewed, without access to these tax credits, development of Indian energy resources cannot easily compete with non-Indian projects that receive tax credits.

However, Indian energy development projects may be able to benefit from tax credits if the project is owned by a non-Indian entity. For example, energy development projects in Indian country can be structured so that non-Indian entities involved in the project benefit from the tax credits and, in certain circumstances, tax credits, such as investment credits for renewable energy assets, can be passed from the tribe to a non-Indian project participant. However, according to a tribal stakeholder we interviewed, this option limits the tribe’s ability to have an ownership interest in projects developing its resources.

Dual Taxation

A severance tax on oil and gas production is a common mechanism governments use to raise revenue, and both states (under certain circumstances) and tribes can impose a severance tax. Dual taxation of resources does not occur on private, state, and federally owned resources and can make development less economically attractive and discourage development of Indian resources, according to some of the literature we reviewed. For example, in 2010, the National Congress of American Indians included state taxation of Indian energy resources as an identified threat to the viability of some projects.

Not all energy development activities in Indian country may be subject to dual taxation, however. For example, states cannot tax Indian tribes or certain tribally-owned corporations for their activities in Indian country. However, a tribal stakeholder told us that most tribes do not have the resources to start a production company to develop their resources, such as oil and gas. As noted above, the lack of access to federal tax credits can hinder a tribe’s ownership of renewable projects.

Tribal officials told us that both states and tribes may also impose taxes on renewable energy equipment owned by nontribal entities, and Interior officials identified dual taxation as a concern that can affect the development of Indian energy resources. In the preamble to the 2012 final regulation governing the leasing of Indian lands for wind and solar power development, among other activities, Interior noted that federal laws and regulations governing surface leasing on Indian lands are comprehensive and preclude state taxation of such leases and activities occurring on leased Indian land. As noted above, a federal circuit court is currently considering whether the federal regulatory scheme for surface leases on Indian land, including leases for wind and solar development, preempts state taxation of non-Indian lessees. In addition, federal courts have found a state tax on non-Indian business extracting tribally owned coal was preempted by federal law and infringed on the tribe’s rights of self-government.

Tribal Governance and Capacity

According to some of the literature we reviewed and several stakeholders we interviewed, perceived or real concerns about the political stability and capacity of some tribal governments have hindered some tribes’ efforts to pursue development of their resources. For example, a 2012 report found that underdeveloped tribal legal infrastructure, outdated tribal governance structures, and politicized business management are real or perceived barriers to Indian economic development for some Indian tribes. Specifically, many tribes do not have modern, comprehensive, and culturally appropriate business and commercial laws or codes. An underdeveloped legal infrastructure can create uncertainty and risk for lenders and other business entities, which may deter lending or raise the costs of doing business through increased interest rates and/or shorter loan terms.

Officials from one tribe told us that it is difficult to build tribal capacity due to understaffing or a lack of qualified staff with needed expertise. The officials noted that several developers interested in developing its energy resources have approached the tribe, but the tribe does not have the legal or business expertise needed to ensure that negotiations with the developers are in the best interest of the tribe.

Limited Access to Infrastructure

Some Indian energy resources are located in remote areas that are distant from consumer markets, and the transmission lines to carry power generated from renewable sources to market are not always readily available. According to a 2014 report, many tribes lack the proximate access to connect with the electrical grid.transmission lines, the profitability of a utility-scale renewable energy project is diminished. In addition, some Indian oil and gas resources are located in areas with limited access to transportation linkages to processing facilities. In 2014, we found that infrastructure limitations can Without access to have economic implications, including lost revenue and hindered development, for oil and gas development in some areas.

A Variety of Factors Have Deterred Tribes from Entering into TERAs

A variety of factors have deterred tribes from entering into TERAs, including: (1) uncertainty about TERA regulations, (2) limited tribal capacity and costs associated with assuming activities currently conducted by federal agencies, and (3) a complex application process, according to some of the literature we reviewed and stakeholders we interviewed.

Uncertainty about TERA regulations. Two stakeholders told us that certain provisions in the TERA regulations need additional clarification. Specifically, TERA regulations authorize tribes to assume responsibility for energy development activities that are not “inherently federal According to officials from one tribe we interviewed, the tribe functions.”has repeatedly asked Interior for additional guidance on the activities that would be considered inherently federal functions under the regulations. Interior officials told us that the agency has not determined what activities would be considered inherently federal because doing so could have far- reaching implications throughout the federal government. According to the tribal officials, without additional guidance on inherently federal functions, tribes considering a TERA do not know what activities the tribe would be assuming or what efforts may be necessary to build the capacity needed to assume those activities. Additional guidance could include a provision of examples of activities that are not inherently federal in the energy development context, which could assist tribes in identifying capacity building efforts that may be needed. In addition, the tribal officials told us that they have requested additional guidance to clarify whether the requirement to develop a tribal environmental review process that includes public input would open the tribe to additional liability from nontribal members and could delay implementation of tribal resource development decisions. Moreover, the tribal officials told us that it is unclear whether a tribe that assumes certain responsibilities or activities currently conducted by federal agencies can administer them using its own protocols, or if the tribe must follow federal regulations to administer these responsibilities and activities. Executive Order 13563 calls for agencies to ensure that regulations promote predictability and reduce uncertainty.and unknowns, BIA may not have fully ensured that the TERA regulations are easy to understand, and tribal participation in a TERA may be hindered.

Without additional clarification to address these concerns Limited tribal capacity and associated costs. According to several stakeholders we interviewed and some literature we reviewed, assuming control of tasks currently conducted by federal agencies can require significant tribal resources. Through a TERA, a tribe assuming control for energy development activities that are currently conducted by federal agencies does not receive federal funding for taking over the activities from the federal government. Several tribal officials we interviewed told us that the tribe does not have the resources to assume additional responsibility and liability from the federal government without some associated support from the federal government to cover expenses for taking over activities currently conducted by federal agencies.

Complex application process. Several stakeholders we interviewed stated that the process to seek a TERA is complex, confusing, and time- consuming (see app. II for details on the TERA application process). This process involves multiple federal agencies, and, according to a few tribal officials we interviewed, will require significant tribal resources to complete the application process. According to Interior officials, the agency is aware that tribes consider the process to obtain TERA approval to be complex and that it has likely deterred tribes from seeking a TERA.

However, according to Interior officials, the process cannot be simplified because all of the steps are needed to meet statutory requirements. Interior officials told us the concern over the complexity and resources needed for a tribe to apply for a TERA is compounded by the fact that no tribe has yet entered into a TERA—leaving the outcome of the process unknown.

IEED Has Provided TEDC Grants to 25 Tribes, but Their Effectiveness at Building Tribal Capacity Is Unknown

IEED allocated more than $2 million through 29 grants provided to 25 tribes from 2007 through 2013 under the TEDC program, but the effectiveness of the program is unknown because Interior has not tracked the benefit of the grants and does not have a documented process to assess whether the grants have moved tribes closer to building the capacity needed to pursue a TERA. According to Interior regulations, these grants are to be used to help tribes build capacity to perform the administrative and technical functions included in a TERA, and Interior reported that one of its goals for fiscal year 2015 is to significantly increase the ability of tribes to assess, plan, develop, and manage their own conventional and renewable energy resources. In addition, the solicitation for grant proposals in the Federal Register notes that a grant recipient is to submit an interim report and a final report with a summary of events, accomplishments, and deliverable products.has not used these reports to track how, if at all, funds were used to eliminate identified capacity gaps. Interior was only able to identify five final reports submitted for grants awarded between 2007 and 2012 and could not locate or identify final reports for the remaining grants awarded during this time period. Without a documented process to measure the effectiveness of its TEDC program, IEED is limited in its ability to ensure that the funds it provides are used to eliminate capacity gaps.

Tribal Energy Development Capacity Grants Tribal energy development capacity grants range from approximately $20,000 to $200,000 to fund activities such as determining the current level of a tribe’s technical, administrative, or management capacity for energy development and determining what process or procedure may be used to eliminate potential capacity gaps in energy resource development. For example, according to the Office of Indian Energy and Economic Development, a tribe received $100,000 in 2008 to assess renewable energy opportunities. In addition, another tribe received $60,000 in 2013 to assess their current energy development capacity.

In addition, the effectiveness of tribal capacity building efforts under the TEDC program may be challenged by the design of the program itself. For example, Congress appropriates funds annually to Interior that are only available for 1 year for grants provided under the TEDC program. According to literature from organizations with experience building capacity, effective capacity building efforts should both provide for sustained, consistent funding over time, since developing capacity can be an ongoing effort that may take longer than 1 year to achieve, and facilitate a tribe’s ability to develop a program that is responsive to each tribe’s unique conditions and priorities. The current TEDC program provides single-year grants for activities that can be completed within the award year. According to a few stakeholders we interviewed, this can hinder a tribe’s efforts to address capacity limitations that require longer- term efforts and strategies.

Conclusions

The development of Indian energy resources has the potential to provide significant benefits to Indian tribes, tribal members, and the nation through both tribal economic development opportunities and by contributing to the nation’s energy production. However, a number of factors have hindered development of these resources, including shortcomings in BIA’s management of the resources and the development process. In particular, without data to verify ownership and use of resources—including current and accurate cadastral surveys, which are generally completed by BLM—BIA cannot ensure that Indian resources are properly accounted for or that Indian tribes and their members are able to take full advantage of development opportunities. In addition, lengthy review and response times at BIA have hindered development and, without a documented process and data to track agency review times, BIA cannot ensure that its review process is transparent or that documents are moving forward in a timely manner. We recognize the challenges that are associated with the administration and management of Indian resources, and the shortcomings we identified in BIA’s management of Indian energy development are not the only factors hindering Indian energy development. However, unless BIA takes steps to address the factors we identified, these factors may continue to contribute to developers avoiding Indian energy resources in favor of developing non-Indian resources. Further, these factors place the agency at risk of not fulfilling its trust responsibility to Indian tribes and their members.

Federal policy calls for providing enhanced self-determination and economic development opportunities for Indian tribes by promoting tribal oversight and management of energy resource development on tribal lands. The shortcomings in BIA’s management of Indian energy development highlight the need for tribes to build the capacity to perform the duties that would enable them to obtain greater tribal control and decision-making authority over the development of their resources. However, uncertainty associated with Interior’s TERA regulations has, in part, deterred tribes from pursuing these opportunities. To enter into a TERA, tribes must have the capacity to take over activities long held by BIA, and IEED has provided some assistance building the capacity needed to assume these responsibilities through the TEDC grant program. However, without a documented process to evaluate the effectiveness this program, IEED cannot determine whether the assistance it provided has moved any tribes closer to eliminating capacity gaps needed to pursue a TERA or whether there are features of the TEDC grant program that may limit the effectiveness of the program.

Recommendations for Executive Action

We recommend that the Secretary of the Interior direct the Director of the Bureau of Indian Affairs or the Director of the Office of the Indian Energy and Economic Development, as appropriate, to take the following seven actions:

To ensure it can verify ownership in a timely manner and identify resources available for development, BIA should (1) take steps to complete its GIS mapping module in TAAMS and (2) work with BLM to identify cadastral survey needs.

To improve the efficiency and transparency of its review process, BIA should (1) develop a documented process to track its review and response times and (2) enhance data collection efforts to ensure it has data needed to track its review and response times.

Provide additional energy development-specific guidance on provisions of TERA regulations that tribes have identified to Interior as unclear.

To ensure the TEDC grant program is effective in moving tribes closer to developing the capacity needed to pursue TERAs, IEED should take steps to (1) develop a documented process for evaluating the effectiveness of TEDC grants and (2) identify features of the TEDC grant program that could limit the effectiveness of the program to help tribes eliminate capacity gaps.

Agency Comments and Our Evaluation

We provided a draft of this report to Interior for review and comment. In its written comments, reproduced in appendix III, Interior agreed with our recommendations related to TERA and the need for additional guidance. Interior also agreed with our recommendations for a documented process to evaluate the effectiveness of TEDC grants and to improve the agency’s data collection efforts. However, Interior did not fully concur with our recommendations related to the identification of Indian resources and the need for a documented process to track and monitor BIA’s review process. Specifically: Interior did not concur with our recommendation to complete its GIS mapping module in TAAMS and identify cadastral survey needs. In its written comments, Interior stated that the agency is developing and implementing other applications that will supplement TAAMS and provide GIS mapping capabilities, although noting that one of these applications, the National Indian Oil and Gas Evaluation Management System (NIOGEMS), is not available nationally. During the course of our review, the agency did not identify these applications as an alternative to the planned mapping component in TAAMS or as a mechanism for addressing cadastral survey needs. As such, we cannot comment on these programs or whether these efforts, when completed and fully implemented, will respond to the purpose and intent of our recommendations. We continue to believe that Interior needs to ensure it can verify ownership and use of resources in a timely manner and identify resources available for development.

Interior did not fully concur with our recommended actions related to the need for a documented process to track review and response times. In its letter, Interior stated that it will use NIOGEMS to assist in tracking review and response times. However, as Interior states in its written comments, this application does not track all realty transactions or processes and has not been deployed nationally. Therefore, while NIOGEMS may provide some assistance to the agency, it alone cannot ensure that BIA’s process to review energy- related documents is transparent or that documents are moving forward in a timely manner. We continue to believe that BIA needs a documented process and increased data collection efforts in order to improve its review and response times for energy related documents.

Interior also provided technical comments that we incorporated, as appropriate.

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If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IV.

Appendix I: Scope and Methodology

To determine what factors have hindered Indian energy development and factors that have deterred tribes from seeking Tribal Energy Resource Agreements (TERA), we searched literature relevant to Indian energy development, including fossil sources, such as oil and gas, as well as renewable sources. We searched various Web-based databases, such as Tulsa (Petroleum Abstracts), ProQuest Environmental Science Professional, Ei EnCompassLIT, Inspec, and PolicyFile to identify existing studies from articles, peer-reviewed and nonpeer-reviewed journals, including law review journals, and government and academic publications, including reports and hearing statements. We identified articles from 2007 to 2014. We examined summary-level information about the literature identified in our search and identified articles that we believed to be germane to our report. We also asked external stakeholders that we interviewed to recommend additional studies on the topic. We reviewed and synthesized literature that included 41 reports, conference proceedings, congressional testimony, and other publications from federal and tribal governments, industry, academics, and nonprofit organizations. It is possible that we may not have identified all of the reports with findings relevant to our objective, and there may be other factors that have hindered Indian energy development that we did not present.

We identified relevant federal laws, executive orders, secretarial orders, regulations, and Interior guidance to determine requirements and responsibilities related to Indian energy development. We obtained available data on key dates associated with the review and approval of energy-related documents for planned or completed utility-scale renewable projects from several Bureau of Indian Affairs (BIA) regional and local officials, tribal officials, and industry representatives. We also obtained information from BIA documents and officials to identify its process for tracking its review of energy-related documents. We compared this information with an executive order and best practices for modernizing the federal permitting and review process identified by an interagency committee, and the Standards for Internal Control in the Federal Government.

To gain additional insights into the factors that have hindered Indian energy development and deterred tribes from seeking TERAs, we interviewed a sample of stakeholders representing numerous agencies and organizations, including officials from BIA, the Office of Indian Energy and Economic Development (IEED), the Department of Energy, the National Renewable Energy Laboratory, the Bureau of Land Management (BLM), the U.S. Fish and Wildlife Service, and the Environmental Protection Agency (EPA). Within BIA, we interviewed officials from all 12 BIA regional offices and 9 BIA agency offices. In addition, we interviewed officials representing 33 Indian tribes, two Alaskan Native Corporations, representatives from 13 energy industry companies or related consulting firms, and representatives from five nongovernmental organizations related to Indian energy development. We did not evaluate tribal activities or actions to govern the development of their resources or assess any potential barriers to energy development such actions or activities may pose. To characterize stakeholders’ views throughout this report, we define modifiers, such as “several” stakeholders to refer to representatives from six or more entities; and “a few” stakeholders refers to representatives from three to five entities. We selected federal offices based on their regulatory oversight authorities, assistance of Indian energy development, and management (trust) responsibilities of Indian lands and resources. We selected Indian tribes to ensure a representation of tribes with various types of energy development, including oil and gas and renewable energy development, a range of experience with development, tribal size, and geographic location. We selected energy industry companies to ensure a representation of companies with both fossil fuel and renewable energy development experience. The findings from our interviews with select stakeholders are not generalizable to those we did not speak to, but rather our findings identify common factors, challenges, and concerns among these stakeholders.

We also conducted site visits to California, Colorado, Montana, Nevada, Oklahoma, and Texas to interview tribal and federal officials and industry representatives, as well as to observe completed energy development projects and those under construction. These sites were located based on a number of factors, including proximity to tribal nations, presence of energy development activities, the potential for energy development, and proximity to federal agency field offices. Because we visited a nongeneralizable sample of sites, findings from these visits cannot be generalized.

To examine the effectiveness of TEDC grants in building the tribal capacity needed to enter into a TERA, we obtained and reviewed all available information from IEED regarding the purpose and use of grants awarded. In addition, to identify characteristics of effective tribal capacity building activities, we reviewed literature from a federal agency, nonprofit organizations, and tribal research institutes with experience building capacity. These included EPA’s Office of International and Tribal Affairs, the Harvard Project on American Indian Economic Development, the Native Nations Institute at the University of Arizona, and the First Nations Development Institute. We compared the identified characteristics with Interior’s TEDC grant program.

We conducted this performance audit from March 2014 to June 2015 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix II: TERA Application Process

Appendix III: Comments from the Department of the Interior

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Christine Kehr (Assistant Director), Cindy Gilbert, Alison O’Neill, Dan C. Royer, Monica Savoy, Jay Spaan, Barbara Timmerman, and Amy Ward-Meier made key contributions.