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Apex and Sioux to Develop Largest U.S. Tribal Wind Projects

The groundbreaking joint venture is taking bold steps to open commercial-scale development in Indian Country.

This article originally appeared in Recharge.

For millennia, Sioux tribes have held to be sacred the strong winds that ripple hard across their homelands, known today as the Upper Midwest region in the U.S.

Now six of them in rural South Dakota are moving to harness that immense force to generate electric power for export and provide what they believe will be jobs, sustainable development and a better future on their economically depressed reservations.

They are the Cheyenne River, Flandreau Santee, Oglala, Rosebud, Standing Rock, and Yankton Sioux. In 2015, they created a power authority Oceti Ŝakowiŋ (OSPA), or Great Sioux Nation in the Lakota/Dakota language, which they fully own to develop renewable energy resources and related facilities for the wholesale market.

The first project comprises two facilities in areas of the state with wind resource that ranks among the best onshore in North America.

An independent, non-profit governmental holding company, it could become an electric utility in the future.

Last August, OSPA formed a unique joint venture (JV) with Apex Clean Energy to develop the largest wind projects on Native American lands – up to and potentially beyond a cumulative 2GW of power capacity.

The partners will arrange financing, build and operate the wind farms. They have not decided if they will retain majority ownership in them. Apex, a privately-held wind and solar project developer, is based in Virginia.

If these projects are successful, they could provide a template for other tribes that want to realise long-held dreams of large commercial-scale wind generation.

The first project comprises two facilities in areas of the state with wind resource that ranks among the best onshore in North America. The 450MW Ta’Teh Topah will be located on the Cheyenne River Reservation in north-central South Dakota and the 120MW Pass Creek on the Oglala’s southwestern Pine Ridge Reservation.

If, as planned, both enter commercial operation in 2021, Ta’Teh Topah will have nine times the nameplate capacity of the Campo Kumeyaay Nation’s 50MW Kumeyaay I wind farm in California – the biggest U.S. online tribal wind project.

They will sell electricity into the Southwest Power Pool, which operates the electric grid in all or parts of 13 states in the country’s interior including South Dakota. Transmission interconnection queue positions for the initial two wind farms are in place with SPP.

Apex estimates that each wind farm will have a 50% net capacity factor and together generate 2.5 million/MWh of electricity annually.

“It’s a substantial amount of generation. At the same time, the SPP market has been able to absorb much more than this amount of capacity annually throughout the recent past,” says Eamon Perrel, vice president of business development at Apex. “These are the same scale of projects that we’ve been consistently developing in SPP.”

Who are the potential customers?

“We’re looking at the project as a way of reaching out to corporations interested in purchasing green energy. They also have a chance to help the community,” says Caroline Herron, OSPA’s project manager, adding they can also pursue their supplier diversity goals by doing deals with the tribes.

“We’re looking at the project as a way of reaching out to corporations interested in purchasing green energy. They also have a chance to help the community.”

“We think we have a great story to tell. Having this type of development happening on the Indian reservations where there is quite a bit of poverty and lack of jobs,” she contends, adding that any potential off-taker – they could include educational institutions, municipalities and utilities – is also helping to support the health and sovereignty of tribal cultures.

According to Perrel, there has been a “lot of good interest” from potential electricity buyers and project financial partners. “First and foremost, we have to identify the off- take. That will drive a lot of what the project looks like from an economic standpoint,” he says.

Perrel believes both wind farms will be economically competitive on a stand-alone basis and for that reason, “we think they will receive project financing like any other project.”

“It’s a strong market for project finance right now. These types of assets are exactly what people are looking for,” he asserts, adding: “These will be premium assets in this market.”

OSPA wants to attract tax equity investors. It intends to monetise the federal production tax credit (PTC) at 80% value, or $19.20/MWh for electric power sent to the grid during the first decade of operation. Should the schedule slip to 2022 for Pass Creek and Ta’Teh Topah, then 60% eligibility, or $14.40/MWh, takes effect.

Troubled History

Tribal land comprises 2% of surface area across the 50 states, but contains about 3.4% of the potential electric power generation from wind resources in the U.S., according to the Department of Energy. There are 275 Indian land areas administered as reservations.

They have a unique status, being sovereign nations with their own set of rights.

Much of today’s Indian Country with the richest wind resource is geographically remote even within the least populous U.S. states such as South Dakota. That was often by design.

The young U.S. nation – which proclaimed independence from Britain in 1776 – sought to expand across the continent, particularly in the 19 th century, and waged a bloody war on the tribes that resisted encroachment on their lands.

The tribes were compelled to sign treaties, which ceded vast swathes of territory to the federal government, but allowed their declining populations to live in peace on “reserved” land. It was usually of inferior quality and purposely distant from the masses of incoming settlers from eastern states.

Over time, federal policy has alternated between trying to forcibly assimilate Indians into mainstream U.S. culture, and a paternalistic approach of helping them preserve their traditional way of life.

From the start, many reservations have been economically challenged. Today, tribes generally remain wards of the federal government – their main financial lifeline and health-services provider.

Quality of life on some reservations is comparable to poor developing nations, with widespread unemployment, elevated secondary-school dropout rates, alcohol and drug abuse, and life expectancy below Haiti – the Western hemisphere’s most impoverished country.

Against that backdrop, at least 75% of Native Americans have left for a better life elsewhere – although many continue to struggle. For those that remain, wind energy offers the prospect of long-term opportunity to earn money, develop the tribal economy and infrastructure, and reduce dependence on federal subsidies.

“In order to be sovereign, we have to have an economic base.”

“In order to be sovereign, we have to have an economic base,” says Faith Spotted Eagle, a member of OSPA’s Council of Elders. “Our dream is that this [wind project] will bring income to our people where we can be more self-sufficient.”

Global warming is another concern for tribes and a potential threat to their traditional way of life. In South Dakota, it is believed to play a role in prolonging droughts and intensifying tornado activity, and the Sioux perceive their lands as increasingly vulnerable.

They have growing resolve to assume responsibility to help preserve Mother Earth – or, as many tribal members increasingly believe, rehabilitate it. Among other things, this means reducing dependence on fossil fuels.

Herron notes that Sioux tribes are thinking “seven generations forward” for every decision they are making today with wind energy. For tribal members, it is important to be good stewards of the Earth for the next generations.

Overcoming Challenges

Critically, they are also addressing challenges that have thwarted past large-scale project development in Indian Country. Perhaps the biggest is assuring companies and investors that contracts will be enforced.

Tribal laws can markedly differ from those in states where reservations are located. Commercial codes are sometimes not well-developed or uniform, and can lack precedents or are outdated.

OSPA has taken a bold step by agreeing to waive sovereign immunity (each individual tribe will retain it), which will give future business partners the right to sue or be sued. “The governing court system will be the (U.S.) federal courts, not tribal,” says Herron. “We’ve taken away some of the things that have scared people off perhaps in the past.”

Perrel says Apex is sensitive to tribal concerns on this critical issue. It is closely coordinating with OSPA to refine lease agreements and make sure tribes are providing the proper waiver of sovereign rights for financing – only when absolutely required.

“We fully recognise you can’t have full project financing subject to law that is unfamiliar to the financing parties. At the same time, it’s important to make sure the waivers are not overly broad because of concern to the tribes,” he says.

“We believe we’ve been able to accomplish the balance where the project is fully protected and not subject to tribal law while at the same time, maintaining the maximum rights for the tribe,” contends Perrel. From a project financing perspective, there should be nothing that is too unique to any other traditional wind project, he adds.

OSPA owner tribes have also done their part separately to allay investors’ concerns.

“I would say all the tribes we are working with have a uniform commercial code,” says Herron. The Cheyenne River Sioux, for example, have adopted South Dakota’s code, while the Oglala “took the best at what was happening at state level” to formulate a code that is used as a model for some other Indian nations, she adds.

The projects also align closely with what Apex describes as its core values: sustainability, entrepreneurship, integrity, professionalism and safety. The tribes, in turn, have brought strong skills and knowledge of land acquisition, cultural and wildlife sensitivity and local regulations.

Perrel gives credit to OSPA for doing a lot of the groundwork to bring the multiple tribes involved to a stage in which they really understand the need to contract and assemble the project in a way such that it can be financed.

In another groundbreaking move, OSPA, which is based on public power models elsewhere in the U.S. but adopted to the status of tribes as sovereign nations, will issue bonds to help finance projects. Akin to municipal bonds, the debt securities would target institutional investors.

“Debt/bond financing can be utilised to a greater degree and earlier in the life-cycle of these future phase wind farm projects,” Herron says, as the PTC goes away at the end of 2019. The bonds will be backed solely by the credit of the PPAs.

Another obstacle has been distrust in Indian Country towards outside investors. Tribes have learned that it’s a bad deal for them to be passive landowners and just get paid for use of their land.

After expiration of PTC tax breaks and PPAs, tribes can find themselves responsible for ageing turbines without the off-take income and financial resources to maintain, repair or replace them.

The Sioux want to share the economic benefits, exercise joint control and be partners in projects. This is partly why tribes in OSPA formed a JV agreement.

“OSPA involvement in decision-making ensures a longer-term horizon and tribal perspective on managing PPAs, financing/refinancing, O&M, repowering and other key aspects of the projects over their full life,” says Herron.

She says the Sioux recognise they must engage with outside experts whether on the development or investment side to achieve the large project scale they want, and to create infrastructure and job opportunities during the construction phase and operations. They turned to Apex.

Apex brings deep project development experience. Among other things, it is providing considerable technical assistance to OSPA such as assessment of wind resource and sites, how to minimise possible cultural and wildlife impacts, and injection analysis from the transmission system.

It is also investing capital to support both Ta’Teh Topah and Pass Creek. “We brought a fresh perspective and really designed what we perceived to be truly economically competitive wind projects,” says Perrel.

The projects also align closely with what the company describes as its core values: sustainability, entrepreneurship, integrity, professionalism and safety. The tribes, in turn, have brought strong skills and knowledge of land acquisition, cultural and wildlife sensitivity and local regulations. Reservations are a mix of communal and individually-owned land.

As the projects will connect into transmission lines owned by the Western Area Power Administration (WAPA), a federal agency, this will trigger the National Environmental Policy Act (NEPA) process. Apex will help OSPA with the mandatory federal requirements and standards for permitting both the wind farms and electrical interconnections.

Perrel says the JV has been given an “incredible amount of support” from WAPA, the Bureau of Indian Affairs and other federal agencies thus far. President Donald Trump has promised his administration will streamline federal permitting processes for energy projects.

“We love Indian Country, right?” he said last August, vowing to “improve your communities and create jobs, jobs like you’ve never seen before.” He slammed federal agencies for imposing burdensome regulations and restrictions under previous presidents that he asserts have prevented tribes from tapping into their energy wealth.

Perrel says he has not seen a more simplified and timely approach thus far, and cautions it is still to be determined how this would occur.

Regardless, Apex has its own internal standards as to the amount of study and due diligence it does on any project prior to building anything.

“To the extent the federal process is streamlined, I think we would still certainly want to be good stewards and make sure we’re not having any impact and to the extent we are, finding ways to mitigate it,” he says. Moreover, the tribes themselves will insist that any impacts are minimal or absent.

What projects are next? OSPA and Apex are eyeing the Standing Rock Sioux Reservation in northern South Dakota for their potential third wind farm. They have identified additional sites on other OSPA owner tribal lands.

“We are looking at the next set of projects and getting the interconnection agreements in by the end of the year for those,” says Herron.

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