A new bill in the House would make it easier for tribes to attract private investment in renewable energy on American Indian lands, opening up a vast new playing field for wind, solar and geothermal firms.

The "FAIR CREDIT Act," introduced by Rep. Raúl Grijalva (D-Ariz.), would amend a feature of the U.S. tax code that tribal advocates say is deterring many renewable energy developers from using American Indian lands and would allow tribes to transfer their share of a federal subsidy to taxable business partners, sweetening the pot for potential developers and tribes looking to own a stake in their energy resources.

As sovereign nations, tribes are exempt from federal taxes and therefore ineligible to collect a 2-cent-per-kilowatt-hour production tax credit offered to owners of renewable energy developments. The subsidy, which is often enough to cover a developer's operating costs, has discouraged would-be investors from potential ventures with tribes.

"This legislation will allow native nations to attract clean, nonpolluting business ventures to their lands," said Grijalva, whose H.R. 2982 was referred to the House Ways and Means Committee in late June. A similar version of Grijalva's bill was introduced in the Senate earlier this year by Sen. Tim Johnson (D-S.D.).

The first commercial scale windmill on American Indian land was this 750-kilowatt turbine, installed in 2003 on the Rosebud Sioux Indian Reservation in South Dakota. Photo courtesy of DOE.

Tribal lands offer a vast potential for renewable energy development, particularly in the blustery Northern Great Plains and the sun-drenched deserts of the Southwest. The federal government estimates that wind potential on tribal lands is equal to 14 percent of the total U.S. generation in 2004. It estimates that solar resources on the country's 562 federally recognized tribal lands could generate 4.5 times the energy needed to power the United States.

Grijalva, whose district includes seven tribes in southern Arizona, introduced a similar version of his bill last summer that stalled in committee. The lawmaker said he is confident the Obama administration will be more supportive of bills that promote clean energy development on tribal lands.

"President Obama has raised the bar for tribal issues," Grijalva said yesterday from his district office. "This legislation is in line with the administration's efforts to incorporate tribes in the dialogue about our nation's future."

The White House has sent a clear signal that it wants to transition the country away from fossil fuels to cleaner, more sustainable forms of energy. The Interior Department this week announced it would fast-track the development of solar energy on public lands, including setting aside more than 670,000 acres for solar research zones and streamlining environmental analyses (see related story).

The new vision is also held by many American Indian tribes looking to shift focus from underground resources like coal, oil, gas and uranium, to above-ground resources like wind, solar and biomass.

Tribes that are able to gain ownership stake in renewable energy projects are able to bring much-needed economic growth and job creation to reservations, many of which struggle with poor infrastructure, poverty and high unemployment rates, said Patrick Spears, who directs the eight-member Intertribal Council on Utility Policy in Rosebud, S.D.

"Ownership enables tribes to have greater say in the construction and management of renewable projects," said Spears, who worked with Grijalva in crafting the bill.

Historically, tribes would enter into lease agreements with outside companies that guaranteed regular rent payments and modest royalties, Spears said. But today's "business as usual" model means that 90 percent of what tribes pay for their energy leaves the reservation.

"The old model is the outside firms would own a project for at least 10 years and you would get your lease check for the turbines and maybe 1 percent to 3 percent royalties," Spears said. "That is the model we want to change."

Spears said laws preventing tax-exempt agencies from enjoying federal tax subsidies are partly aimed at electric cooperatives and should not apply to tribes. Co-ops, for example, have the authority to transfer capital costs onto their customers, whereas tribes typically buy their power from outside the reservation.

"We can't add a nickel to everyone's bill to pay off our projects," said Bob Gough, secretary for the Intertribal Council on Utility Policy. "So where is the private investment going to go? Across the reservation line."

Moreover, the federal government has an explicit trust obligation to assist in tribes' economic development, added Gough.

But it will take more than tax incentives to build large-scale wind or solar farms on tribal lands. Developments need available transmission lines in order to tie into the grid and sell electricity on the market. Many American Indian lands lack extensive power grids and are poorly equipped to develop major energy farms.

Also, with many reservations located in remote, rural parts of the country, investors have less incentive to take risks on costly transmission projects.

In the Intertribal Council on Utility Policy's territory, 3,000 megawatts of wind power are "shovel ready" but in need of a modernized and expanded power grid to get off the ground, the council said. New tribal developments in the plains must be sited close to a Western Area Power Administration substation if they want to be viable, Gough said.