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General Memorandum 11-147

General Memorandum 11-147
BIA Publishes Proposed Rule Amending Leasing Regulations; 60-Day Comment Period

On November 29, 2011, the Bureau of Indian Affairs (BIA) published a proposed rule to make amendments to 25 CFR Part 162, governing the review and approval process for leases of Indian lands. 76 Fed. Reg. 73784. As we reported in our General Memorandum 11-034 (March 18, 2011), the BIA consulted with tribes on a pre-publication draft of the proposed rule. The proposed rule reflects numerous comments from tribes.

The proposed rule and several related documents are available on the BIA website at: www.bia.gov/WhoWeAre/AS-IA/Consultation/index.htm. The other documents on the website are: a Dear Tribal Leader letter; Tribal Consultation Supplement (which summarizes the proposed rules); BIA Responses to Comments Received during Tribal Consultation Comparison Chart between Existing Rule and Proposed Rule; Frequently Asked Questions; and Redline Version of Part 162 Showing Proposed Changes. For your convenience, we have attached a copy of the Dear Tribal Leader letter and the Tribal Consultation Supplement. The deadline for filing comments is January 30, 2012. We are prepared to assist in the development of comments as needed.

OVERVIEW

The proposed rule would make extensive changes in Part 162. In the existing regulations, all leases for non-agricultural purposes are subject to the same regulations. The proposed would add new separate subparts to address residential leases, business leases, wind resource evaluation leases, and wind and solar resource development leases. The existing subpart for non-agricultural leases would be removed.

The proposed rule would make a number of important changes, including establishing deadlines for BIA action and limiting the grounds on which BIA could disapprove lease documents. Certain kinds of subleases would no longer require BIA approval; other kinds of subleases would be deemed approved if not expressly disapproved within the specified deadline. Permits for temporary uses of Indian land would no longer require BIA approval as would certain kinds of land assignments. In the matter of determining the amount of rent for leased land, the existing rule requires an appraisal unless BIA grants a waiver; the proposed rule would defer to a tribal decision for tribal land and would provide some flexibility for individually-owned Indian land. The proposed rule would also allow BIA to waive the requirement for a performance bond and would eliminate the performance bond requirement for leases for housing for public purposes. With respect to enforcement of compliance with leases, the proposed rule would require BIA to consult with landowners prior to taking certain kinds of enforcement actions.

The proposed rule states that improvements on trust or restricted land are not taxable by states or localities, without regard to ownership. Proposed §§ 162.315(c), 162.415(c), 162.515(c). This point is discussed in the preamble to the proposed rule (76. Fed. Reg. 73785) as follows:
These regulations are intended to preempt the field of leasing Indian lands. The Federal statutory and regulatory scheme for leasing, including the regulation of improvements, is so pervasive as to preclude the additional burden of State taxation. The assessment of State taxes would obstruct Federal policies supporting tribal economic development and self-determination, and tribal interests in effective tribal government and economic self-sufficiency.

Subpart C – Residential Leases. This new subpart would govern leases for single family homes and housing for public purposes. There are two key features of the proposed rule that are of particular importance to tribal housing programs. First, the proposed rule would establish timelines for BIA to act on leases, lease assignments, amendments, and subleases. For residential leases and assignments, BIA would be required to act within 30 days (with one 30 day extension), and BIA's failure to act on a lease or assignment within that time period, could be appealed by the tribe or tribally designated housing entity (TDHE) pursuant to 25 C.F.R. part 2. For residential lease amendments and subleases, the proposed rule would adopt a "deemed approved" framework: if BIA does not take action within a specific timeframe (30 days plus one 30 day extension), the amendment or sublease will be "deemed approved." In the earlier draft, leasehold mortgages were also subject to the "deemed approved" approach; in the new draft, leasehold mortgages can no longer be "deemed approved," because BIA received comments indicating that lenders who seek leasehold mortgages rely on BIA approvals. The Administration has touted this provision in its press statements on the proposed rule, and this addresses one of the key concerns raised in the comments on the draft: that BIA takes too long to approve leases and that such delays substantially impair development of housing (as well as business activities under other regulatory provisions). The proposed rule also states, however, that any provisions of the lease that are not consistent with federal law will not be considered to have been "deemed approved," leaving some uncertainty as to just what has been approved in the "deemed approved" process.

A second important feature of the proposed rule is that it would exempt subleases for public housing purposes from the requirement for BIA approval. This means that any lease between a TDHE and a low-income tenant or homebuyer (which is technically a sublease from the master lease between tribe and TDHE) would not require approval. In order to be exempt from BIA approval requirements, however, the sublease must meet three conditions: (1) the master lease must expressly state that BIA approval of subleases is not required; (2) BIA must have "approved a general plan for development" for the parcel, and (3) BIA must have also approved a sublease form and general rent schedule. These conditions, the terms of which are not described in any detail, would appear to involve BIA playing a not insignificant role in affordable housing activities by tribes and TDHEs.

Subpart D – Business Leases. This new subpart would govern leases for commercial or industrial leases for retail, office, manufacturing, storage, biomass energy, waste-to-energy, and other business purposes. In addition, this subpart would govern leases for: (1) residential purposes not covered by Subpart C; (2) business purposes not covered by Subpart E (wind energy evaluation, wind and solar resource development; and (3) religious, educational, recreational, cultural, and other public purposes. For leases covered by Subpart D, BIA would have 60 days to make a decision on a complete lease application, although BIA could notify the applicant that it needs more time. Failure by BIA to meet the deadline could be appealed.

Subpart E – Wind and Solar Resource Leases. This subpart would establish procedures for obtaining BIA approval of wind energy evaluation leases (WEELs) and wind and solar resource (WSR) development leases. A WEEL would be a new kind of short term lease to allow for possession of Indian land for the installation of equipment such as meteorological towers to evaluate the wind resource. The environmental review for a WEEL could be limited to the impacts of doing the evaluation, i.e., it need not consider the impacts of developing the wind resource. For solar resource development, the proposed rule would not establish such a two-step process because evaluating the solar resource does not require taking possession of the land. The approval timeframe for a WEEL is 30 days; for a complete WSR development lease application it would be 60 days.

BIA RESPONSES TO PRIOR COMMENTS

As noted earlier, the BIA conducted a series of consultation sessions with tribes using a pre-publication draft of the proposed rule. Responses to those comments are not included in the proposed rule as published in the Federal Register but, rather, are set out in a separate document captioned "Response to Comments Received During Tribal Consultation," which is available on the website. In some cases, BIA made changes in response to comments; in others, the "Response" document explains why changes were not made. In this memorandum, we take note of a few of the points raised in that document.

In response to tribal concerns that certain provisions could be interpreted to render state law applicable, proposed section 162.013 was revised to say that state law applies only "in the specific areas and circumstances in Indian country where Congress or a Federal court has made it expressly applicable." In addition, proposed section 162.014 was revised to say that, unless "contrary to Federal law," BIA will comply with tribal laws, including those relating to land use, environmental protection, and historic or cultural preservation.

A number of changes have been made in the proposed rule in response to tribal comments on valuation and fair market rental. One change was to separate the requirements for tribal land from the requirements for individually-owned Indian land. The basic reasoning is that if a tribe agrees to accept less than fair market value, BIA should defer to the tribe's judgment. The "Response" document also clarifies that it is permissible for a tribe to negotiate developer fees under tribal law. With respect to adjustments of rent, the proposed rule has been changed to allow tribes to include automatic adjustment clauses and thereby avoid periodic review of the adequacy of rent.

A number of changes were made in the provisions relating to residential leases in response to comments from tribes and coordination with the Department of Housing and Urban Development (HUD). The revisions are summarized in a table in the "Response" document. Among other changes, the proposed rule was revised to allow for assignments and subleases without BIA approval in certain circumstances.

The new subpart relating to Wind and Solar Resource leases was substantially changed in response to tribal comments. One such change is that a short-term agreement for evaluation of a wind resource is now recognized to be a kind of lease; such agreements had been called "permits" in the pre-publication draft. In response to tribal comments regarding compliance with the National Environmental Policy Act (NEPA), the "Response" document notes that the environmental review for an evaluation lease can be less detailed than for a development lease. A point not raised is that BIA could consider a revision to its NEPA implementing procedures (516 DM 10) to establish a categorical exclusion for wind energy evaluation leases. Such a change is outside the scope of the proposed rule but would be a complementary action to expedite BIA approval of such leases.

The "Response" document discusses a number of other topics, including mandatory lease provisions; bonding and insurance; surveys; enforcement; due diligence; payment; improvements on leased land; the applicability of the regulations (and the range of tribal activities that are not covered); compatible uses; appeals; the "general" provisions; and cross-cutting issues.

CONSULTATION AND COMMENTS

As announced in the Dear Tribal Leader letter, three consultation sessions are planned: Seattle, WA, January 10; Palm Springs, CA, January 12; and Rapid City, SD, January 18. Written comments may be submitted prior to the January 30 deadline by any of the following methods:
• By email to consultation@bia.gov.
Include the number 1076-AE73 in the subject line of the message.
• By U.S. Mail or hand delivery (with the number 1076-AE73 on the outer envelope) to the following address:
Del Laverdure, Principal Deputy Assistant Secretary – Indian Affairs,
U.S. Department of the Interior, Mail Stop 4141
1849 C Street NW,
Washington, DC, 20240.

If you would like further information regarding the proposed leasing regulations, or assistance in preparing comments, please contact us.

# # #

Inquiries may be directed to:
Dean Suagee (dsuagee@hobbsstraus.com) or
Craig Jacobson (cjacobson@hobbsstraus.com)

Available Documents for Download ( any referenced attachments are included in download )


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