Wind energy in Indian country: a study of the challenges and opportunities facing South Dakota tribes

South Dakota Law Review, Fall, 2009 by Patrick M. Garry, Candice J. Spurlin, Derek A. Nelsen

An additional area of special interest at the Owl Feather War Bonnet site was the relocation and replanting of native plants after they were disturbed. (41) This was to be done by using native grass seed to replace the existing vegetation in areas that were affected during construction. (42) This would also be accomplished by minimizing vehicle use to limit the effects on the habitats, and identifying and taking appropriate precautions to protect any threatened or endangered species in the area. (43)

2. Procuring Private Investors

Inviting private investors to participate in the Owl War Bonnet Wind Project was part of the reality of undertaking such a project. (44) Private investors were needed for two primary reasons. First, they provided the Tribe with the necessary capital, which was substantial, and second, they provided expertise in the construction and design of the project, with both the physical structure as well as the financial structure. This design, however, was naturally received by the Tribe with some resistance as it was seen as providing too much control and authority to the private investors and not enough to the Tribe. (45) This reality was not ideal from a tribal perspective as the tribal council, and members, often "fear of another developer coming to the Tribe and taking it for a ride." (46) Consequently, finding a private sector partner became necessary to bring the project to fruition but also resulted in some hesitance from the tribal council. (47)

This situation could be summarized by stating that some tribes may lack the experience and expertise needed to build a wind power facility. From the outset, tribes and investors need to have a mutual understanding of the unique issues present, most notably, the tribal independence that is potentially curbed through influence from a non-tribal investor working to maximize their own interest in the project. This dichotomy between the two entities can create a more complicated dual ownership structure that must be identified and addressed by the parties involved from the project's inception.

The development group that emerged for the Rosebud Sioux Tribe was Distributed Generation Systems, Inc. (DISGEN). This company specializes in wind energy development and has worked extensively with tribes in the Northern Plains. (48) DISGEN invested early in the project's development and has offered guidance as the project has taken shape. (49) This involvement, however, created a situation that required the parties to work together to find an appropriate ownership structure between the investor and the tribe that reflected their joint, and at times, conflicting interests. A most important aspect of this ownership structure was how investors and the Tribe could mutually benefit economically from their partnership in the project.

The original plan called for a private investor to receive the profits from the sale of the electricity for the first ten years after construction was complete. (50) The Tribe would then take ownership as early as the eleventh year. (51) This ownership structure was the result of the Production Tax Credit (PTC) utilized for the term of a private owner's ownership period. (52) This model of ownership, called a flip model, is the result of restrictions imposed on the parties involved through the necessity of accessing the PTCs. (53) A flip model allows the private investors to take advantage of the PTCs for a period of ten years--the length of time the PTCs are available. (54) Taking advantage of these tax incentives is of paramount importance in developing wind power facilities and, consequently, ownership agreements must be structured to trigger them. (55)