The DOE, LPO, and Inflation Reduction Act Incentivize Significant Tribal Energy Development
Pound-for-pound, Tribes have the potential to be among the United States' most prolific clean energy developers. Tribal lands, which compose approximately 5.8% of the total land area in the contiguous United States, have the potential to produce 6.5% of the entire country's renewable utility-scale technical energy, with Alaska Native Villages poised to generate significant additional energy.1 Stated a different way, the total utility-scale technical potential for renewable energy on Tribal lands in the contiguous 48 states is 20,912 terawatt-hours (TWh) annually, roughly five times higher than ALL energy produced in the U.S. in 2021 (the U.S. produced a total of 4,116 TWh of electricity last year).2
a. DOE Loan Programs Office
The DOE Loan Programs Office (LPO) is, in many ways, the unsung hero of federal U.S. energy development. Broadly, the LPO finances large-scale energy infrastructure projects in the United States. The LPO provides loans to energy projects that, otherwise, would have difficulty being funded by the market. This includes projects utilizing innovative technologies (TESLA was funded by the LPO), and projects in markets that have difficulty accessing capital, like Tribal communities.3
To date, the LPO has been a stunning success. Since 2009, the LPO “has issued more than $35 billion in loans and loan guarantees to more than 30 projects across the United States, catalyzing new energy technologies, creating jobs, and building on its deep sector expertise.”4 Not only has the LPO driven U.S. energy development, but it has done so in a sustainable and fiscally responsible manner. As LPO reports in its quarterly portfolio performance summary, over its history interest paid exceeds losses and LPO maintains a default rate of less than 4%.5
The IRA significantly broadened the reach and capacity of the LPO. The IRA appropriated “approximately $11.7 billion in total for LPO to support issuing new loans[,]” thereby increasing the “LPO's existing loan programs by approximately $100 billion in new loan authority.”6 The IRA also expanded the LPO's reach with the establishment of the LPO Energy Infrastructure Reinvestment (EIR) Program. Through the EIR Program, which provides $5 billion in funding and a total cap of $250 billion in loan authority, the LPO can finance projects that repurpose or replace energy infrastructure to avoid, reduce, utilize, or sequester air pollutants or anthropogenic emissions of greenhouse gases as well as those projects that utilize innovative technologies.7
b. LPO Tribal Energy Loan Guarantee Program
The LPO's Tribal Energy Loan Guarantee Program (TELGP) “supports tribal investment in energy-related projects by providing direct loans or partial loan guarantees to a federally recognized tribe, including Alaska Native village or regional or village corporations; or a Tribal Energy Development Organization (TEDO) that is wholly or substantially owned by a federally recognized tribe federally recognized Indian tribe or Alaska Native Corporation.”8
As stated, the IRA provided significant new funding authority to the LPO. Of greatest significance to Tribes, the IRA increased the “aggregate amount of loans available [under the TELGP] from $2 billion to $20 billion.”9 This staggering increase in lending authority has primed the TELGP to drive comprehensive Tribal energy development across the United States.
Matt Ferguson, Senior Advisor and Consultant for the LPO, addressed the TELGP's objectives at the recent Tribal Clean Energy Summit of 2022. The summit, which was led by various DOE representatives including Secretary Granholm, provided an opportunity for Tribal leaders and key energy partners to discuss how to make progress toward Tribal clean energy goals.10
At the summit, Mr. Ferguson explained that, as a rule of thumb, establishing $100 billion in scale in a given energy industry establishes the necessary economies of scale, reduced energy costs, and necessary infrastructure, supply chains, and workforce development to ensure continued self-sufficient growth of that sector. With the additional lending authority provided by the IRA, the LPO has targeted catalyzing $100 billion in scale for DOE focus sectors, including Tribal clean energy development.
i. TELGP Eligible Projects and Financing
The TELGP can “support a broad range of projects and activities for the development of energy resources, products, and services that utilize commercial technology (innovative technology is permitted but not required).”11 These projects include, but are not limited to
The TELGP provides two types of financing. It can provide partial loan guarantees from eligible lenders (i.e., a federally regulated commercial bank, other financial institution, or a Tribe satisfying requirements established by DOE), 90% of which is guaranteed, based on full faith and credit of the U.S. Government, by the LPO.13 The TELGP can also provide “direct loans for eligible energy projects through the U.S. Treasury's Federal Financing Bank.”14 This direct loan authority is particularly significant in that it allows Tribes to enjoy extremely competitive terms and interest rates through the Federal Financing Bank.
ii. TELGP Tribal Consultations and the Application Evaluation Process
The LPO TELGP evaluates application in two parts. In part one, the LPO will review a potential project “to determine eligibility and readiness to proceed.”15 In part two, the “LPO will review the project to evaluate reasonable prospect of repayment.”16 If the LPO makes a favorable determination of the project, “DOE will commence due diligence, structuring, negotiation, credit approval, documentation and closing processes that are similar to those of commercial lenders.”17
As Mr. Ferguson made clear at the Tribal Clean Energy Summit, a Tribe may consult with the TELGP for free and as many times as it would like, to discuss potential energy development projects prior to applying. As such, Tribes interested in developing energy projects should reach out to the TELGP.
II. Tax Incentives
In addition to the increased LPO financing authority, the IRA provides significant tax incentives to galvanize U.S. energy development. These tax incentives include, but are not limited to, the
Historically, Tribes have had difficulty leveraging federal tax incentive programs because they are not required to pay certain federal taxes. Congress and the Administration addressed this issue by ensuring that each of the above tax credits qualify for “direct pay.” Through direct pay, qualifying entities, like Tribes, are treated as taxpayers having paid tax equal to the credit and are thereby directly allocated 100% of the value of the credit amount.19
The BIL provided over $65 billion to support power and grid development throughout the United States. While some of the BIL programs have already run, there remain significant active programs supporting Tribal energy development. These programs include:
In addition to those programs developed by the BIL, the IRA also establishes financing and grant programs to support Tribal energy development. These programs include the: $27 billion Greenhouse Gas Reduction Fund, $5 billion Climate Pollution Reduction Grants, $760 million Interstate Electricity Transmission Lines program, and $150 million Tribal Electrification Program. More information on these programs will become available as the administering agencies release pertinent regulations.23
If you have any questions concerning the DOE, LPO, BIL, or IRA, please do not hesitate to reach out to: Stephen Anstey – firstname.lastname@example.org, Mark Riedy – email@example.com, or John Loving – firstname.lastname@example.org.
Kilpatrick Townsend – Energy
Kilpatrick Townsend's Energy Team serves innovative clean energy industry clients who develop and finance solar, wind, biomass, clean fuels, energy storage, EV charging, and battery gigafactory projects, while also assisting energy users in implementing sustainable energy programs and practices like direct air capture and carbon capture and sequestration or use. For more information, please visit our website – Energy (kilpatricktownsend.com).
Kilpatrick Townsend – Government and Regulatory
Kilpatrick Townsend's Government and Regulatory practice offers policy, legislative, compliance, and regulatory advocacy services and legal guidance on both broad and industry-specific matters, including energy, sustainability, Tribal, finance, and digital assets (cryptocurrency, stablecoin, and CBDC). For more information, please visit our website – Government & Regulatory (kilpatricktownsend.com).
Kilpatrick Townsend – Native American
Kilpatrick Townsend's Native American Practice Group represents Tribes and Native businesses across the United States. The group is dedicated to empowering Tribal governments, and provides comprehensive legal services on all Tribal matters, including water law, complex litigation, treaty rights, contracts, natural resources, rights-of-way, trespass, grant programs, federal regulations and compliance, climate change, energy, and economic development – Native American (kilpatricktownsend.com).
Mark J. Riedy
John C. F. Loving
Senior Government Relations Advisor
Stephen M. Anstey