James Jensen:             Welcome to everyone. I'm James Jensen, a contractor supporting Western Area Power Administration and the Office of Indian Energy Policy and Programs Tribal Energy webinar series. I am filling in for Randy Manion as today's webinar chair.

                                    Today's webinar titled "Best Practices in Tribal Energy Business Models" is the fourth webinar of the 2018 DOE Tribal Energy webinar series. Let's go over some event details.

                                    Today's webinar is being recorded and will be made available on DOE's Office of Indian Energy Policy and Programs website, along with copies of today's PowerPoint presentations. These will be available in about one week. Everyone will receive a post-webinar e-mail with the link to the page where the slides and recording will be located. Because we are recording this webinar all phones have been muted for this purpose. We will answer your written questions at the end of all the presentations; however, you can submit a question at any time by clicking on the question button located in the webinar control box on your screen and type in your question. We will try to keep the webinar to no longer than two hours.

                                    Let's get started with opening remarks from Kevin Frost. Mr. Frost is Deputy Director of the Office of Indian Energy Policy and Programs, duty-stationed at headquarters in Washington, DC. Kevin is responsible for making sure the Office complies with its statutory obligations and furtherance of its missions and goals. Prior to working at DOE, Kevin was a councilman for the Southern Ute Indian Tribe of Colorado. He worked on a myriad of tribal issues such as energy and national resource development, rural infrastructure, health, as well as finance. Kevin has also previously served as the delegate for the Indian Country Energy and Infrastructure Working Group and a board member of the National Tribal Energy Association. He holds a Bachelor of Science Degree in conservation science from the College of Santa Fe and a juris doctorate from the University of Denver.

                                    Kevin, the virtual floor is now yours.

Kevin Frost:               Thank you, James. Hello, everyone. I join James in welcoming you to the fourth webinar of the 2018 series. This webinar series is sponsored by two US Department of Energy organizations: the Office of Indian Energy Policy and Programs, and the Western Area Power Administration. The Office of Indian Energy directs, fosters, coordinates, and implements energy planning, education, management, and programs that assist tribes with energy development, capacity building, energy infrastructure, energy costs, and electrification of Indian lands and homes. To provide this assistance our deployment program works within the Department of Energy across government agencies and with Indian tribes and organizations to help Indian tribes and Alaskan Native villages overcome the barriers to energy development.

                                    Our deployment program is composed of a three-pronged approach consisting of financial assistance, technical assistance, and education and capacity building. This Tribal Energy webinar series is just one example of our education and capacity-building efforts. This webinar series is part of the Office of Indian Energy's efforts to support fiscally responsible energy, business, and economic development decision-making and information-sharing among tribes; is intended to provide attendees with information on tools and resources to develop and implement tribal energy plans, programs, and projects; highlight tribal energy case studies; and identify business strategies tribes can use to expand their energy options and develop sustainable local economies.

                                    Today's webinar will focus on business structures available for tribal energy businesses. Attendees will learn which business structures are commonly used and the advantages and disadvantages of these various structures. Tribal leaders and community members will gain insight to help them select the best structure for their opportunities, goals, existing codes and laws.

                                    We hope this webinar series is useful and welcome your feedback. Please let us know if there are ways we can make the series better.

                                    With that I will now turn the virtual floor back over to you, James.

James Jensen:             Thank you, Kevin. Today we have four speakers giving two joint presentations. I will introduce all of the speakers now.

                                    Our first presentation is a joint presentation from Ken Parsons and Tara Kaushik. Ken Parsons is a senior counsel in Holland & Knight's Washington, DC office. His practice focuses on resolving critical pacts and business organizational issues for tax-exempt organizations in the Indian tribal governments. He provides federal and state tax-planning and compliance advice and regularly represents clients in ruling requests, audits, and tax controversies. He is on the board of directors for the National Intertribal Tax Alliance and is a frequent author and speaker on tribal tax and business issues.

                                    Joining Ken is Tara Kaushik. She is an attorney in Holland & Knight's San Francisco office and a member of the firm's West Coast Land Use and Environmental Group. Ms. Kaushik focuses her practice on regulatory matters with a specific emphasis on energy, natural resources, and the environment. She represents energy developers, local governments, utilities, Alaskan Native corporations, and tribal entities and project developments, including the negotiation of power purchase agreements and project financing.

                                    Our tribal case study today is from the Eastern Band of Cherokee Indians. We have two individuals presenting their project: Cameron Cooper and Kevin Cornelius. Mr. Cooper was formerly the energy coordinator for the Eastern Band of Cherokee Indians. While serving as the energy coordinator he started a waste energy project to look at reducing waste-hauling and convert those waste _____ into energy. Mr. Cooper is presently serving as the retail development specialist for the Eastern Band of Cherokee Indians. This position supports retail development efforts by providing research data and marketing of the commercial interests of the Eastern Band of Cherokee Indians. Mr. Cooper still plays an integral role in the energy initiative and has oversight of the waste energy project that has been funded through multiple grants awarded by the Division of Energy and Metal Development.

                                    Mr. Cornelius works for the Red Fern LLC to develop green energy projects. Over the past five years Red Fern has worked with multiple tribes on feasibility studies to determine the viability of using a variety of heat ducts for conversion to renewable energies. He also works with tribes on evaluating buildings for installation of solar power and LED lights to create a brighter and more efficient way of utilizing solar power. Mr. Cornelius was CEO of Oneida Seven Generation and he completed thermal conversion technology demonstration projects and had the technology completely vetted and received EPA and State of Wisconsin DNR permits.

                                    So with that I will bring up the slides for the Holland & Knight presentation. Just one moment.

                                    All right, Ken and Tara, it should be all set for you.

Tara S. Kaushik:         That's great. Thank you very much, James. And thank you, Kevin, for that great introduction. I'm very pleased to be with you all today. This is Tara Kaushik with Holland & Knight. I'm a partner at the San Francisco office.

                                    Just to start things off, wanted to just note that this will be a pretty broad presentation about the various structures that are available options for Native American tribes, for Alaskan Native corporations. Obviously the way that this would work is it should be very tailored to your goals. And you want to first always ask the question, "What are my goals?" Is my goal to have a solar project, maybe just lease the land that the tribe owns to the developer who is going to then develop a solar project or a wind project, geothermal or even waste-to-energy, as was mentioned here today. Maybe the goal is to form a utility if you want to actually be in the energy business and serve power, electrical power or gas or water to community members and be in control of your resources. Maybe the goal is to finance projects that you want to fund, such as renewable energy projects or a natural gas project on tribal land.

                                    Whatever the goal might be, there's always that delicate balance that you want to strike between having sufficient tribal government oversight over, you know, what sort of project is going to be developed on the land, versus also, you know, trying to keep doing business with your business partners with some flexibility to have daily operations such that you don't have political or as much government involvement in making daily decisions. So that's always a hard balance to strike.

                                    And each of these entities and structures we'll discuss, you know, what can and cannot be done or what the advantages and disadvantages are of each. But it's really going to end up being tailored to what your goals are, you know, and what sort of business partners you're going to end up doing business with, are there any government regulatory agencies that are involved, since energy is a regulated market in most cases. So with that I'd like to turn it over to my colleague, Ken, who is very well-versed in all of the business structures that we're going to be talking about today.

Kenneth Parsons:       Thanks, Tara. Can we go to slide three, James?

                                    So, as Tara mentioned, I'm Ken. I'm on the opposite side, I'm in Washington, DC, so we're on opposite coasts, but we're both together today on the phone, joining to discuss these in tandem. So I'm going to give an overview. I always like to know where we're headed when I'm on the receiving end of a presentation, so I'm going to tell you that these are the basic four topics we're going to go over today. The key factors in choosing a structure, as well as the available structure, and the pros and cons we're going to do as we talk about each available structure, rather than at the end. And then the last we're wanting to discuss before turning it over to the other guys is the special considerations that you might want to be looking at for joint measures, because sometimes your energy products is going to involve more than the tribe.

                                    So can we go to the next slide?

                                    For all of these business structures you're going to be looking at a number of key factors. You want to protect tribal assets as well as tribal sovereignty, minimizing liability while maximizing federal and state tax advantages. As Tara mentioned you also will have to facilitate compliance with _____ requirements of business partners and regulatory authorities and it's also going to depend on what type of project you've got and your goals. Are you going to have your own utility? You know, is it a big project, a little project? What are you trying to accomplish? Are you trying to separate business from politics? Are you trying to limit your liability? All these things are going to be baked into what we end up doing.

                                    Next slide, please.

Tara Kaushik:             And let me just chime in there if I may.

Kenneth Parsons:       Go ahead.

Tara Kaushik:             So I would say with respect to facilitating compliance with lending requirements and financing, you know, education is always key and it's not always clear to business partners as to how things work in terms of jurisdiction and a tribe having its own internal permitting approvals for projects, for instance. Or needing to, you know, have its own diligence team to look into what sort of project is going to happen. And so it's worth it to take just a little bit of time, and I encourage especially business partners who are not tribal owned and not familiar with the framework to really educate on the process. You want to know at the end of the day what groups or sets of laws are going to apply to such a project, for instance. Or you want to know at the end of the day who all you need to go to to get approvals and consent for the project. Because the last thing you want at the end of the day is to form a business structure, to launch with a project and then find out that, you know, you needed other internal approvals at the tribal level, at the leadership level, perhaps with the land departments at the tribe, things like that that you didn't anticipate.

Kenneth Parsons:       Thank you. So moving on to the next slide. Going though some common structures that you might want to consider. And I just want to say that this is necessarily high-level discussion, there's going to be no one-size-fits-all approach. As Tara was mentioning, your decision is really going to depend on your goals as well as the type of project and, you know, other considerations: do you have a partner, other things you might want to consider. So this is just a broad framework to think things through, but it's really going to depend on your considerations.

                                    So I've broken it down into two broad categories: government entities and business entities. The government entities are the tribal government, an unincorporated division, and a tribal authority. The business entities, there are actually more, but I think these are the four common ones from here: a Section 17 corporation, a tribally charted corporation, LLC, and joint ventures.

                                    Moving on to the next slide.

                                    Focus on tribal government. All right, so as you all know, tribes have inherent rights of self-government, including the power to engage in business. So you could actually just do an energy project as the tribe itself. Advantages of that, easy to organize; you don't have to do anything, right? Access to capital. Tribes have ability to raise certain types of capital that other types of businesses don't if it was a corporation. And so if you're doing a business as the tribal government you get the same benefits as the tribe and also the IRS has ruled that a tribe is not taxable, whether it's doing business on or off the reservation. The problem with this, as we alluded to earlier, is that you really don't have a separation of business from politics if you are engaging in business with the tribe itself. Also you might have some issues with immunity, you know, the tribe has the privileges of immunity, so does sovereign government. But when you try to engage in business other partners might want you to waive your sovereign immunity. So if you're in the tribal government and it's doing the business on its own you really don't want to waive the whole tribe's sovereign immunity. You might want to do that on a project-by-project basis and forming a different type of entity helps you do that.

Tara S. Kaushik:         And let me just chime in there, Ken, if I may. I'd say you want to pay special attention to, you know, depending on what sort of project or goal you have, their may be audit provisions in a lot of energy contracts, particularly with regulatory authorities. So to the extent that your project actually touches upon some government agency, whether it's federal or other, that would have some jurisdiction over say sending electricity to the power grid or buying electricity from the power grid, things like that. There are going to be audit provisions in there. So as a tribal government you probably really don't want to be leaving yourself open to be audited for whatever records at the end of the day.

Kenneth Parsons:       That's a good point. So how can we get the benefit of being a tribe without engaging in business directly? So some of these other entities will go through that. The first one is talking about unincorporated division. So you can kind of silo an activity within the tribe without it being, you know, a separate corporation or a limited liability company. And since it's really the tribe, you share the same tax rate, the same privileges and immunities, but the disadvantage is you're still mixing business and politics to a certain extent. You don't have a separate entity, you've just got a separate division. And as Tara was mentioning on the previous slide, you also might have requirements of partners and regulatory agencies that might require you to do business as a separate entity or might make it, even if it's not an absolute requirement, effectively a requirement.

                                    So moving on to the next one. So the next slide is tribal authorities. So these are often used as holding companies for tribal business operations, including tribal utilities. You can do them as unincorporated instrumentalities or as political subdivisions. These are different characteristics that an unincorporated entity might have. As a tribal entity you could apply to the IRS for a ruling that you're a political subdivision. I won't get into all the details, but it helps you get tax-exempt debt and shores up the tax status of your entity. So there are reasons to do that. We often see these instrumentalities in the energy sphere.

                                    Tara, did you want to add some points on that?

Tara S. Kaushik:         Yeah, I was about to say I'm in on that. Perfect timing. So, you know, what are examples here? We've seen and helped our clients with forming tribal authorities for the purposes of economic development. For instance, if they wanted to do leasing of land for manufacturing kind of purposes, if you were going to have like an energy plant, or if you were going to lease land for, you know, say a renewable energy project: solar, geothermal, wind, energy storage, et cetera. You know, which could be very effective if it's structured the right way, has some government oversight and government functions, of course, but of course you also have to implement some separation there so that in the event that there are any audit provisions or, you know, limited waivers of sovereign immunity that need to occur in order to do business you would be able to work with government oversight to do that. It's worked very effectively for tribal utility authorities as well. It went for tribes that have formed their own electric or gas or water or waste utilities. This is often a very common structure that is used.

Kenneth Parsons:       And also when utilized by other government entities, not necessarily tribal. Like state governments have their own authorities for utilities as well.

Tara S. Kaushik:         Mm-hmm. That's a good point.

Kenneth Parsons:       Tara was mentioning, you know, again, we come back to this separation of business and politics. I think as we start to get into the authorities and also moving into the business structures on the next slide, is regardless of the structure you choose you have to address certain critical governance issues and that is how are your board members selected, what kind of experience do they need to have? You might want people that, you know, have a lot of energy experience and members on your tribal council might not necessarily have that experience.

                                    And speaking of a tribal council, you might want to consider how much overlap you have between the members of the board of directors of whatever entity you choose and the tribal council. If your goal is to separate business and politics, you might not want a complete overlap. But at the same time you do want some tribal control, and ultimately an entity is going to report to the tribe, so you'd like to have accountability to the tribal government, you know, through reporting requirements or approval of major transactions, things like that, and maybe a few tribal council members on the board. So all of those, you know, it depends on the project, your tribe, your goals, your needs, but it's just important to keep those in mind as we go through all the structures.

                                    So the first one I'm going to talk about is the Section 17 corporation. This is a federally chartered corporation. The charter is issued by a secretary of interior and wholly-owned by the tribe. In fact, you can't have any equity from any other outside investors or anything. So if you're looking to do like a joint venture, you can't use a Section 17 for that. A Section 17 can be a member of a joint venture, but it can't have outside equity as a part of it.

                                    Section 17 is like the business arm of a tribe, so it's going to share the same privileges and immunities and the same tax treatment of the tribe, and it often uses a holding company for tribal subsidiaries. So for a lot of tribes it's kind of the main business arm.

                                    Go on to the next slide.

Tara S. Kaushik:         Let me just note there, Ken, with the Section 17, that has often actually been used as an alternative structure to tribal utility authorities, for instance. A lot of folks form Section 17s if they want to do more development side kind of energy projects. So particularly if there's, for instance, a goal to lease and zone a certain section of the reservation for renewable energy projects. Very often a Section 17 corporation would be formed for that. And all that the corporation would do is, you know, oversee the leasing for such projects and the development for such projects, and even handle in conjunction with the tribe the permitting for such projects.

Kenneth Parsons:       Thank you. So on the next slide, just going through some advantages of Section 17 corporations, I mentioned some of these. Because it's the business arm of the tribe it shares the same characteristics of the tribe. For tax purposes it's going to be tax-exempt on or off the reservation, but unlike some of the other entities we were discussing, where we were discussing the government entities, it does create that separation between the business side and the political side, 'cause you've got the separate entity now, and it also enables you to waive your sovereign immunity, waive the sovereign immunity of the Section 17 corporation while protecting the assets of the tribe. Because the waiver of the Section 17 doesn't apply to the tribe. So the tribe is only liable for the assets it has put into the Section 17 corporation, but it—like a regular corporation a C-corporation, it will separate liability from its owner.

                                    You can also get financing, like I was saying, on the same terms, without subjecting the tribe's assets. And also there's disclosure issues; sometimes when you're trying to get financing you need to have a lot of kind of intrusive disclosures, and limiting it to the Section 17 corporation enables the tribe itself not to have to produce all the documents that relate to the tribe itself, but limit it to Section 17 corporation.

Tara S. Kaushik:         Let me just note there quickly with respect to financing, there are a lot of lenders and business partners outside the tribe who may need to be educated a little bit about this, because what they try to do often is look to the tribe to say, "Well, hey, we need to have some assets for you to borrow against," right? "We need to have some sort of money or collateral at the end of the day for us to provide a loan to you or for us to fund or finance a project." And what I've seen happen with such instances is, you know, Section 17s often have the ability to issue funding or bonds. Is that correct, Ken?

Kenneth Parsons:       Yes, that's correct.

Tara S. Kaushik:         So that tends to be very helpful if, for instance, you know, bonds are issued, which the lenders can look to to say, "Okay, this company has assets, it's not just a sort of shell that is created by the tribe; it definitely has something or us to enforce our contracts against in the event we need to do that. So that's something to sort of take into consideration when you're forming this Section 17.

Kenneth Parsons:       And I think that's a good segue to the next slide, where we discussed some of the disadvantages of the Section 17. One of them at the very end there is that the business partners, lenders, and regulatory agencies may be unfamiliar with a Section 17 corporation, and that's kind of what Tara was just referring to. And part of what we're doing here, you know, in addition to educating tribes, is hopefully other people who are not tribes can find this or are listening to it now and understand what a Section 17 corporation is so we can help them become more familiar.

                                    And also, unlike going to a state, like Delaware's website, where you can search different articles of corporation for different corporations, with a Section 17 corporation there's really no database of Section 17 charters. So although a lot of tribes have Section 17 corporations, it's not something a third party can just go in and look up and get comfort, you know, like a Certificate of Good Standing. I think actually the Bureau of Indian Affairs will issue those now, but there's not like a—you can't find everybody's charter online right now.

                                    So speaking of the charter, one of the disadvantages, it's very lengthy to get a charter. Unlike going to Delaware and you can form a corporation in minutes, it takes a long time to go through the charter approval process because you've got to go through the secretary of the interior. And in fact, if you want to amend your charter you also have to go through interior. And you could run into a problem, say you already have a Section 17 corporation and you're considering going into the energy sphere and you want to do a utility or something. Well, your charter might not be broad enough to cover that. It could have been issued in the 1930s. you know, that's when Section 17 first came out. So you'd have to look at your charter, and if it doesn't cover that or if it's not broad enough to be read to cover that, you might have to consider, well, do I want to amend my charter? It could take months. Or should I want to consider one of these other entities where I don't have to do that?

                                    So that's just another consideration. I wouldn't say that, you know, you definitely wouldn't do a Section 17 in that case, but, you know, a lot of times people are starting a project and they want to get it moving quickly.

                                    And finally, on the Section 17 disadvantages, as I note in the second bullet point there, it can only be revoked by an act of Congress. So some of the other entities you can just knock in the head, this one, it's not that easy.

Tara S. Kaushik:         So let me just chime in there quickly with respect to timing. Very often project developers are on a timeline. Time is money and unless a project gets done in time they may not get, for instance, renewable energy credits or subsidies or even, you know, tax equity financing. However they're getting the project done, that can become an issue. And so what we have seen done before is, you know, maybe a tribe will start a tribal utility authority, which can be created a big faster than the Section 17 process. The tribe itself can create that authority without necessarily getting Department of Interior approval the way you would for a Section 17. And then after the Section 17 is actually created and approved, you know, they can convert the business to go under that Section 17 charter.

James Jensen:             Tara and Ken, this is James. I want to interrupt. We have a few questions that are coming in and I think it would be valuable probably to try to answer some of them now, rather than wait until the end. So I'll just read them off to you, the ones that are specific to this Section 17, and we can address some of these now if possible.

Tara S. Kaushik:         Sure.

James Jensen:             First question, "We often hear of non-taxation as an attractive approach to bringing in partners and capital. So are you suggesting we do not utilize the Section 17 for that, but rather tribally-chartered corporation?"

Kenneth Parsons:       All right, so Section 17 you can't have equity ownership, as I mentioned. But a tribally-chartered corporation, you can use it say in a joint venture or something. So the project itself, if the tribe is doing it, it's going to be exempt on or off the reservation. But to the extent you've got a tax-exempt partner or another investor, they're not necessarily going to get the benefit of your tax exemption, but there might be credits and other things that they could get, and we'll get to that in the joint venture aspect of this presentation, where there might be a tax credit or something that can help out, an entity that's taxable that can be allocated. There are limitations on that, but I hope that answers the question, James.

James Jensen:             Yeah, thanks, Ken. If it doesn't, they can have time to clarify.

                                    Let's go to the next question. And, Tara, I'm not sure exactly when the timing of this question was, but it says, "Tara, are you talking about leasing reservation land to an outside entity or leasing tribal land to a member of the tribe who is a developer?" I don't know if you—

Tara S. Kaushik:         I was more talking about leasing land to an entity, which is different, I think, than leasing it to a member.

James Jensen:             Gotcha. And then a clarifying question, "So Section 17 is a way of taking personal financial liability away, like an S-corporation?"

Kenneth Parsons:       So not personal liability, but tribal liability. So it's an entity that's wholly-owned by the tribe, and so the tribe already has limited liability from _____, sovereign immunity and everything. But it allows the Section 17 to share that while engaging in business. So when Section 17 came out in the '30s, if you look at the legislative history it was all about allowing tribes or helping tribes to do business in the modern world. Because somebody's not going to be doing business with you if you can just claim sovereign immunity, so you have to oftentimes waive your sovereign immunity on a project, like an energy project or another type of project. And so you can do that here with the Section 17 without making the tribe's assets liable.

James Jensen:             Okay. And one last question, "Can you provide clarity"—excuse me, my screen just changed. "Can you provide clarity of the bond to be applied for Section 17 as an asset?" I'm not sure I understand that question. Do you?

Tara S. Kaushik:         Sure. So I think that was part of the discussion, Section 17s can issue bonds, and sometimes that can be valued as an asset for lenders to provide financing. So, you know, Ken, you may want to just talk about how Section 17 corps can issue bonds, provide some background there.

Kenneth Parsons:       Yeah. So I don't want to get into the weeds too much, but basically like a state government or a local government, tribes can access capital through tax-exempt bonds. The only thing is they're limited in their ability to do that by what's called the Essential Government Function Test. So unlike states, who can pretty much raise taxes and bonds for any project, tribes in Section 7871 of the Internal Revenue Code are limited to projects that are for essential government functions. So there's some dispute about what that means or how much it could cover, and also there's a push on the legislative side to get parity there for tribes to be treated as they should be, like a state or a local government for those purposes and not be limited by that test.

Tara S. Kaushik:         So the bottom line there is, you know, assuming this Section 17 can issue bonds for a project that has a government function like providing electricity, you know, which is a basic need, right, or providing water, for instance, assuming that the corporation could issue bonds to that effect and get money for the project, that money would be something that a financer would look to as collateral in part for, you know, helping to fund the project. Or they might say, "Well, what other contracts does the Section 17 corporation have that we could use as collateral?" Remember that depending on what the project is, if it's, for instance, you know, solar panels, solar panels themselves don't really have much value, right, for a lender to actually lend against them. In the industry what's typically done is a lender will lend against, you know, contracts for the purchase of the power from an entity and the revenues from that.

                                    So just like that example, you know, they're looking to the revenues. What sort of revenue does this Section 17 corporation have where we can do business with them without looking directly to the tribal government?

James Jensen:             Right. So for the audience, if you continue to submit written questions I will try to filter them and identify the timely ones and interrupt the presentation to ask those and then save most of the questions for the end, just as an FYI. So keep submitting your questions.

                                    All right, Ken and Tara, that's it for now. Let's proceed.

Kenneth Parsons:       Yes. And I encourage you to interrupt us to the extent that you have questions.

Tara S. Kaushik:         Yeah, I was about to say _____ to ask questions. Yeah, we're always happy to answer them.

Kenneth Parsons:       Yeah, you don't need to wait till the end. So moving on to the next slide, we're going to talk about tribal law corporations. So this is one of the times where there are actually other types of corporations that you could form. State law corporation is another, but it's generally not a tax-efficient vehicle, so I focused on tribal law corporations here.

                                    As noted in the first bullet, you can form these under a corporate code or by resolution as a one-off. So if you just have a need to form one you could just do it by resolution, but if you find that you're going to be forming a number of tribal corporations, consider a corporate code for your tribe if you don't already have one. It's preferable to have a corporate code because it helps standardize certain elements, forms, things like that, and also creates, you know, an easy-to-find record of which corporations you've got and amendments and all those factors. And it's not as difficult as you might think to have a corporate code, 'cause you could always use a state model to start, or another tribe's model, and then you modify it for your specified needs.

                                    So advantage of tribal law corporation is easy to establish, like any other type of corporation, like a C-corporation, it limits liability. Here you can have sovereign immunity as well if you satisfy what's called an arm-of-the-tribe test. I won't get into all the details, but basically if it's sufficiently connected to the tribe then it will satisfy the arm-of-the-tribe test and it will have sovereign immunity. Again, though, you may have to waive it, as I mentioned before.

                                    This advantage of the tribal law corporation is that the tax status is uncertain, and that's at the state and the federal level. There's an IRS revenue ruling that held that a state-law corporation is taxable, even if it's wholly-owned by the tribe. The IRS has yet to clarify the tax treatment of a tribally-chartered corporation. So it's probably not the best vehicle, but sometimes your vehicle is dictated by other considerations, like, you know, lender or partners considerations, so it's certainly important to know about tribal law corporations.

                                    Next slide. More common that tribal corporations these days are tribal law LLCs, limited liability companies. These are because an LLC, it shares the liability—limited liability of a corporation, but at the same time it has a flow-through tax treatment. So as I mentioned in the previous slide, you could actually have a corporation that's wholly-owned by a tribe but the corporation is taxable. Well, if you have an LLC, as long as you select path through treatment or you're wholly-owned, which we think should be disregarded for tax purposes, that tax treatment is just going to be the same as the tribe's. So there's only one layer of tax for the owner, and if you're the owner, again, the tribe should be tax-free. And again, you have limited liability, just like with the corporation. So that's why I noted here it's an increasingly popular choice, including for energy projects.

                                    So moving on to the next slide.

Tara S. Kaushik:         I would just note that tribal law LLCs are often used when folks are on a quick timeline. I see that more often used definitely than the tribal law corporations. And, you know, they can be easy _____ to do business with for sure. But you definitely want to be aware of some of the uncertain taxation and immunity disadvantages, which I think Ken is about to talk about.

Kenneth Parsons:       Yeah. And just before we get to that, the same issue I was mentioning with the tribal law corporation is you might want to have a corporate code for the same reason you might want an LLC code, you can create your own LLC code based on another tribe or another state, and that will help formalize the requirements, especially if you're going to be doing it more than just a one-off. So advantages to tribal LLCs, as Tara was just referring to, typically they're easy to form, especially if you have your own code.

                                    These are one of the entities unlike the Section 17 corporation, that allows a joint venture. You can have multiple owners of the LLC, so that's one way for you to engage in business with another tribe or a taxable entity. As I mentioned previously, if it's wholly-owned by the tribe it's going to be disregarded as a separate entity, so for tax purposes the IRS is just going to see the tribe. If you've got more than one owner then you've got a choice to be a partnership—treat it as a partnership, it would be flow-through tax treatment, flow through to the owners, or treat it as a corporation, and typically for a joint venture you would be picking the partnership status. So again, if the tax treatment is flowing up to the owners, your taxable partner will be taxed, but the tribe as a tax-exempt entity will not be taxed on its share of the profits.

                                    Another advantage to LLCs is they're familiar to lenders and business partners. One of the disadvantages of the Section 17 was lenders might not know much about this entity. Well, everybody knows what an LLC is. They also have less-formal operating requirements than a corporation. You still have to observe formalities, but there's just fewer requirements than with a corporation. As I referred to before, this advantage of taxation is somewhat uncertain. So actually don't want to get too into the weeds here, but IRS regulations state that an entity, including an LLC that's wholly-owned by a state or a foreign government is automatically treated as a corporation. So again, a corporation is a separate entity, so there could be a tax hit at that corporate entity before it even gets up to the parent entity. So currently that regulation says nothing about tribes, so we currently interpret it as it doesn't apply to tribes. So if you're a wholly-owned LLC by a tribe you're disregarded or you're not treated as a separate entity, but the IRS could choose someday to conform the tax treatment of tribal LLCs to that of state and foreign government-owned LLCs.

                                    So unlike some of the other entities we talked about, once you get into these types of entities, corporations, tribal LLCs, when you're outside of the governmental entities, including the Section 17 corporation, it's harder to get the types of financing we were talking about, the tax-exempt financing. You can do other things, like government-guaranteed loans, you can do taxable bond issuances, private placements, commercial bank financing, but probably no tax-exempt financing if you're doing a tribal law LLC.

                                    So moving on to the next one, going to do joint ventures. And this is the last component of my presentation with Tara today. So the first consideration when you're thinking about a joint venture is what kind of entity are you doing? A corporation? Are you going to be a partnership or an LLC? And is it going to be state or tribal? Now you probably know from just going through the previous slides that if it was ultimately your choice as a tribe you would probably choose the LLC and probably the tribal, because that would probably give you the best mix of tax and limitational liability and all of those aspects that would be the most beneficial to the tribe. But an investor might come in and they might want a corporation for some reason or they might say, "Well, I don't know anything about a tribal law LLC. I want a state law LLC." That can happen.

                                    You know, so partner may be unfamiliar with tribal law, they may dictate other things, so you can either educate them about what a tribal law LLC is or you might end up, depending on your needs, you might end up with a state venture.

Tara S. Kaushik:         Let me just add in there, if you were going to educate your joint venture partner on, you know, what it is to have the tribal LLC, what really helps there sometimes is transparency. There are tribes who choose to make their LLC codes publicly available. There are folks who prefer not to as well. But if you are fine with making them publicly available it might help get your business partners very comfortable with seeing the LLC codes and, you know, having that transparency so that they understand how very often those codes are very similar to state LLC codes.

Kenneth Parsons:       That's correct, they're often modeled off the state LLC code and just have a few modifications that make sense from a tribal perspective, in particular for a tribal-owned wholly-owned LLCs or corporations. And also sometimes if the tribe already had to form say a state law entity previously, before they had their own code it might have conversion statute where it would allow a conversion from the old entity to the new entity, but also the state of formation would have a say about that, too.

                                    So okay, so moving on to the next slide, considerations other than the ones we were just talking about for joint ventures, whether to own the joint venture directly or through an intermediary business entity. Sometimes there's multiple layers of entities developing. You could have different layers for liability reasons or other reasons. Important to note that sovereign immunity does not extend to the joint ventures, so it will extend to, you know, a Section 17 corporation, some of the government entities we discussed, but once you start talking about an entity that has outside investors in it that have an equity stake, well, that entity no longer could share the tribe's sovereign immunity; it's got other assets mixed in outside non-tribal investors in there.

                                    And as I previously mentioned with the LLC, the tax rebate is going to flow up to the business partners. So the revenue might be taxable to business partner, but it won't be taxable to the tribe. The entity itself, the LLC is not going to be taxed. It might have a tax return filing obligation, but it's more of a reporting requirement with the IRS. The actual taxes will be paid by the investors. And again, if the investor is not taxable then there is no tax.

                                    Now the last bullet is talking about how to allocate profits, losses, deductions, and tax credits. So as you might imagine, you're in business with a taxable entity, your project might qualify for certain tax credits, certain tax deductions for example, that the tribe as a non-tax-paying entity might not be very interested in, but the business partner might be very interested in. So you could allocate some of that to the tax-paying entity within reason; there are IRS regulations about this, so you can't just do it willy-nilly, whatever you want, you have to follow the rules on it. But there is some ability to allocate the deductions in a way that would be most efficient on a business level.

                                    Do you want to add anything on joint ventures, Tara?

Tara S. Kaushik:         Yeah. I would just chime in there saying, you know, let's go to the larger question, why do JVs at all, right? Most often I have seen it useful for our tribal clients, where say you don't necessarily have the capital or the financing for a project and you want a partner who would help finance that. You want to also, a the same time participate in the development of that project, because if  your goal is to take control of the resources on the land, to be able to get into the energy business or the development business on your own, to educate community members about that, to get training, you know, in this line of business. This was a very good way to be able to do that, working hand-in-hand with a business partner.

                                    Of course, you want to make sure, though, at the end of the day that, you know, have an entity as part of the joint venture that perhaps does have the sovereign immunity and tax exemptions that that entity can still get. But you also want to have the flexibility of doing business with a partner who understands how the tribal process works, how the laws work, and are familiar with these types of projects.

                                    So it's really an education on both sides, I think, which makes for greater visibility of energy projects on tribal land. And this is an emerging space that I see really blossoming within the last—especially the last five years. So I hope to see a lot more of these, just because I think that financers will get comfortable and perhaps tribes will get comfortable with some of the amazing projects that can be done on tribal lands through these joint ventures. But, you know, there are a lot of different options that you can use in order to do them and protect yourself.

Kenneth Parsons:       So that concludes our slide presentation. Thank you all for your attention. James, any other questions come in that would be a good time to address now?

James Jensen:             Yeah, let me just pull it up real quick. There was one. Excuse me.

                                    Here it is, "Can a joint venture do an IPO via a corporation?"

Kenneth Parsons:       I'm not sure I totally understand the question, but I don't see why you couldn't do a corporate IPO. You know, like not a Section 17 corporation of course, because you can't have equity ownership, but if you are an investor in a private corporation that took off, I don't see why you couldn't take that public.

James Jensen:             That's it. And one more here. It says, "So a wholly-owned tribally-owned LLC is considered disregarded with the IRS," and that's just a clarifying question, I think.

Kenneth Parsons:       Yes, that is exactly right. I think the only drawback that—I think that that's definitely the result that a wholly-owned LLC is going to be disregarded. The only issue there is, as I mentioned, that for some reason the IRS regulations currently treat wholly-owned business entities, including LLCs, by a state or foreign government as a corporation. And as you know from the earlier slides, you want to definitely avoid a corporation, 'cause it's typically a separate tax-paying entity, and arguably—arguably you can get an exemption from tax either way through like an arm-of-the-tribe test. But generally, just to answer the question, yes, it would be disregarded.

                                    Sorry, I'm a tax lawyer; I can go into lots of detail. Probably way too much detail, so just yes, verification.

James Jensen:             No, thanks, Ken and Tara. That was a great presentation. And a reminder to the audience, this presentation and all the presentations today will be available, the PowerPoint slide as well as an audio linked with the PowerPoint slide presentation will be available via the Internet. 'Cause I know there's a lot of dense information there provided and a lot of us want to hear it more than once for it all to sink in. So I encourage you all to check back in a week or so and watch the aspects of it that are interesting another time.

                                    And keep asking questions. We'll get to more questions at the end, but for now we're going to move on to our next presentation. And let me just bring it up here.

                                    All right, Cameron and Kevin, the floor is yours.

Cameron Cooper:       Thank you, James. Just want to thank you once again for introducing—our introduction earlier. I really appreciate everything that _____ had to say. It was very educational, even, again, even though I've heard it a lot over the past couple years, as we're trying to look at that. And hopefully we can drill down into that a little bit today from the EBCI perspective and how we're moving forward and creating structure and trying to diversify our economy here on our reservation.

                                    So you can advance to the next slide.

                                    So what we're going to talk about today is technically just a project that we're currently working on, and it was carried over from when I was energy coordinator for the tribe. And it kind of hit home with me, as I'm an enrolled member of the Eastern Band as well. We created a resolution back in 2007 which set up our strategic energy plan, and that plan ranged everything from looking at solar to wind to water and even not necessarily waste energy, but biomass. And so as I started out in that position, you know, everybody loves solar and we do all that good stuff, but you look at Western North Carolina as a region, we're very mountainous and our tribe sits over 56,000 acres, and of those acres I'd say if you flattened it all out we probably have 200,000 acres. So we have a lot of south-facing ridges, but sometimes we don't have access to those south-facing ridges.

                                    And so, you know, I started looking at, "Well, what's the alternatives here?" Well, obviously we've got water ability here, you know, with a lot of creeks and rivers and stuff. And I want to apologize to everybody on the phone right now; you may hear my hillbilly accent. If you're having trouble understanding what I'm trying to say, later on just please let me know if you need me to clarify something.

                                    However, so one of the things I looked at was biomass, and as I started looking at that I was looking at kind of biomass boilers, so to speak, where, you know, you're putting trimmings in and stuff of that nature. There's one project I've seen in BOE, you know, several people have looked at switch _____ and stuff of that nature. You know, I kind of went down that road looking, "What does this mean?" And then you run into the big stuff, like incineration and stuff of that nature. And I was like, "Well, that's not something necessarily I want to do." And then it just dawned on me one day 'cause of an article I read about, you know, taking waste and converting it to energy. Well, like I said, you run into incineration, but that wasn't what I wanted to focus on. And I found a few little projects here and there that were really looking at taking municipal solid waste and putting it through a system or, you know, something that they call pyrolysis.

                                    You can advance to the next slide, James.

                                    And while we were looking at this, you know, kind of the definition that you see there is thermal conversion. And so within thermal conversion you're basically breaking down whatever feedstock you put through a system of this nature and it's turning back into a gaseous form or even a liquid form. As we all know, liquid cannot be created or destroyed. And so it's just one of those things where you start, you know, "How do we capture that?"

                                    And so one of the things I'm easily started looking at was well, if I can put municipal solid waste through, what it's getting out on the back end is a synthetic gas, and that synthetic gas appears to be, you know, pretty reliable and comparable to natural gas. And I was like, "Well heck, if I can do that then I can run generators and I can run electricity." So, you know, bright-eyed and bushy-tailed, that's the way I started looking at this project. Well, as I started kind of researching it more I run into Kevin Cornelius, who you'll hear from here in a little bit, and they were looking at this stuff in the Oneida region in Wisconsin. And so as was talking to him, you know, he kind of even broadened my horizons even more that, "Cameron, I mean plastics is the way to go." You know, plastics is oil, as it's created from oil anyway, so if we can break it back down to it's baser form or what it just was created from then we can recapture that and sell the byproduct.

                                    And so what you find is even with this municipal solid waste, where there's plastics, and the real kicker, tires; all three of those put together, you can create biofuels from all three, and each one of them have some other byproducts that are valuable to several different markets.

                                    One of the things we've really found this past go-around is that tires have valuable byproducts. And so when we got to this point for us—and I feel like I need to explain this for everybody in the room is, you know, we came up with a goal within our strategic energy plan and we moved forward with that goal, and that goal was to see what was out there, not only to help offset tribal costs, but to offset, you know, or to create money and generate revenue, 'cause that's how I look at stuff, there's always a way to potentially help your tribe out in several different classes.

                                    And so one of the things we noticed right off the bat when he started talking to me about plastics, and even tires and municipal solid waste, immediately I started saying, "Well, we have it." All right? So in Western North Carolina, as I talked about it being mountainous, the western-most counties, so west of Asheville, North Carolina—if you're a Google person and like to get on Google Maps, look up Asheville, North Carolina, and to the west of Asheville pretty much every county past Buncombe County, which is where Asheville sits, is they're hauling their trash. So they're transferring it. They have transfer stations and they're hauling it to—Georgia is pretty much the biggest spot that they're tipping their municipal solid waste, and that's everything from plastics to tires to just regular municipal solid waste. And so there's tipping fees involved in that, there is hauling fees involved in that, and, you know, for us as a tribe it's pretty much about, you know, a $300,000.00 haul bill a year. And so, you know, immediately I was like, "Well, if we can offset that and create electricity off of that, or even create oil products or even other potential byproducts, that would be great."

                                    And so as we started coming up with this idea in our head, well, we've got to figure out a way to vet this, because there is nobody—and I challenge each and every one of you on this call to get on Google and look up waste energy projects. You're going to see a million different leads and what you're going to find out is nobody is doing this the correct way or the right way in any facet. Everybody's idea is kind of the same, but it's all different, and everybody holds everything close to the chest. And the reason why is because the technology is not patent-able. The reason why is because it is so basic. I mean in reality I like to joke with people and I say—when I show you, and you'll see a picture of it in the next slide or two, I like to equate it to, you know, we're here in the mountains, so we tend to love our moonshine here in Western North Carolina. And one of the things about that is that this to me is a glorified still, a glorified moonshine still is what I like to call it.

                                    And so when you look at it from that perspective, everybody holds everything close to their chest. So we had to go out there and figure out a way that we could vet this to our people. Not only that, but to see if it looks true and if it holds a value there. And so what we did is we worked with the Department of Energy and Mineral Development, Michael Stephenson there, you know, he really helped us get our feet underneath us as we went through a waste characterization study to look at our waste and to see how much plastics was in there, 'cause that was kind of the focused when we started, was to look and see how much plastic stream we had coming through our transfer station.

                                    And then with the second grant we went out there to demo version to get the demo version here so that everybody could kind of kick the tires, so to speak, and see that it wasn't detrimental to the environment. And that's the cool thing about this process, at no point does feedstock every come in contact with an open flame. Everything is degraded over an amount of time, and so you have what they call a retort time, where your byproduct is sitting there breaking down and then basically you condense that gas into usable items.

                                    And so with the third grant we just prolonged the demonstration project to really start looking at feedstocks and then what we're getting out of that third grant was an actual business model or a business plan.

                                    And I think you can go to the next slide there, James.

                                    And so to reiterate this, this is the thermal conversion unit. And as you can see, you see where it says "feedstock hopper." This is a dual _____ system; you want this thing completely oxygen-deprived as much as possible. You do not want oxygen in this. And so they go as far as proving to your constituency or even paper that you're trying to sell this to, that there is no open flame to feedstock. Where you see the upper and lower retort auger chambers, those are internal. So the feedstock goes into that, and that big blue bin basically is the chamber. And underneath that is a low-burning natural gas or propane burner.

                                    But here's the neat thing, it's a self-sustaining system. So once the system is up and running and you're running it 24/7 you can basically produce enough gas that it runs itself to heat that chamber. But on top of that, through the pyrolysis process the feedstock, as it breaks down, creates its own heat. And so it's actually heating up as it's breaking down as well. And so then you have the discharge valves, where it comes out, and then after that point, like I said, it goes through what I consider a glorified distiller, so you can siphon off whatever gases or byproducts that may be available.

                                    The one thing that we found with our tire study is that there is a lot of carbon, and that carbon we have found at this point appears to be carbon black. Now it might not be the most purified form of carbon black, but it's pretty close. And so with that being said, what that gives us is another byproduct that is pretty valuable out there on the market. And I'd say it can go anywhere from, what is it, $0.49 a pound now?

Kevin Cornelius:        _____ to $1.96 a pound.

Cameron Cooper:       Yeah, up to $1.96 a pound. And if it's pure, if we can figure out a process to create pure carbon black, I mean you're talking, what is it 500—yeah, go ahead. I'll let Kevin kind of talk about the carbon black.

Kevin Cornelius:        So just a little bit with the tires, when we went through the process, we're trying to get the best carbon black. And that's something when we started, the system is not designed to handle tires, and so we had to make some modifications for it to run without jamming up with the carbon black in it. And we've been able to do that. We get—on our test results we're about 92-percent pure carbon black. For it to have the high value we've got to be at 99-percent. And some of it has some graphene in it, but it's not a pure graphene. So if we're looking at how we can refine the carbon black, the value of that can increase to quite a bit if we can get the higher-value carbon black. But the problem is getting from that 92-percent to the 90-percent, and we've done that through—or we're working on that through different temperatures and different residence time of the tires. But it does work well.

                                    So what we've done is we've really taken a system and made changes to it so that it can run tires through effectively. The system itself is only designed to run 100 pounds per hour, and we're running at 75 pounds per hour. So even though the tires with the carbon black is difficult, we're still almost running it as efficient as you can run the machine if you were just running what it was intended to do.

                                    So with that I think what we're looking at is working with the tribe to say how can we go forward with—the tribe owns the intellectual property because we've been doing all this testing and modifications on their behalf, and so now we want to look at how can we combine and take this to the next step.

Cameron Cooper:       The reason why I kind of want to get it detailed a little bit more so on the project itself is so that I can show people kind of where we're at as far as moving forward with the structure, because this has a lot of moving parts, as we've kind of found out over the past couple years in looking at this project. And as I said before, earlier, there's nobody to turn to, there's nobody I can go out here and say, "Build me one and get it up and running tomorrow." We're having to do this. And nobody wants to do that. There's no tribe out here that I've ever seen to have an appetite that won't just be the first on the block to do anything. We're kind of a monkey-see monkey-do so to speak for lack of a better phrase. And so in reality, you know, we've kind of had to figure out a lot of this stuff as we've went along.

                                    But as you can see in this picture, the one thing I want you to notice too which makes this business venture even more kind of—another moving part, is the fact that I hope that you can see the scale there, and underneath, where that says "dual discharge valve," that's a wheelbarrow. Now the most efficient part of this system would be that you would want a one-ton unit. This one that's in this picture is pretty much the one that we have here, which is a 100-pound unit. A one-ton unit you're probably looking at I'd say around about 15-percent larger than what we're looking at in this picture right now, which means it's very mobile.

                                    And so that's one of the other things that we're looking at too, is how do we make this mobile and potentially go out here to Indian Country or anybody else that may need or have a landfill that's overfilled, 'cause we can put already-processed landfill waste back through this system. Or plastics that are sitting out here or, you know, case-in-point, one of the examples I think that we would want to go after eventually is the fact that China has recently said that they no longer want our recyclable plastics. And so you're going to have an influx of plastics sitting somewhere and this machine is definitely a machine that can take that load and produce something from it. And so that's kind of where we're at.

                                    So next slide, James.

                                    Which brings us to _____ just kind of explained to at this point is, you know, LLC/Section 17. Well, we've looked at both, and it took us an education period of about five years for our tribe to get to the point where our constituency understood what Section 17 and LLC means. Let's see, hold on just a second. I was bringing up something I needed to look at real quick so I can explain this next part.

                                    So anyway, what we're looking at is kind of from an LLC standpoint, because we kind of feel like we're behind the ball; we've got some extenuating circumstances here in Western North Carolina, as our only pretty much income for the Tribe itself and its operation is its casino operation. We enjoy a 200-mile radius of no competition in Western North Carolina. We're within 75-percent of the entire USA population within a day's drive. So needless to say, we kind of like we say we're sitting in the catbird seat in Western North Carolina with our casino, which is great. But there's impending doom on the horizon for the Tribe as we're looking—as Georgia is looking to potentially get some formed of organized gaming. And so on the horizon we have tried to prove to our constituency that we do need to diversify our economy and one of those ways is Section 17.

                                    Well, we did a summit of Section 17, which basically said, you know, "Hey, Tribe, you can set this up how you want. It comes down to you setting up and you can put in it what you want to." And then you have other tribes out there at _____ Summit that say, "We have a Section 17 but we've shelved it. We're primarily using an LLC structure." And so as a tribe right now we're kind of in that crunch point where we don't have really time to sit down for a Section 17, though I do believe that we will exercise that later down the road because I think it is something that we can shelf and have for future purposes.         

                                    So right now we have set up an LLC code as of this year. Earlier this year we set it up, so as of next month and our next council session we are going to be hopefully putting a board together to, you know, come force with LLC plan for the LLC and obviously to request money for that LLC. And so as we move forward in this project we've gotten to a point where like we know at this point we're just going to have to pretty much jump off the deep end with this technology and invest in it.

                                    And that's one reason, even though, you know, I know some of you probably think it would be a lead and they'd potentially be able to help us from a granting perspective, and that is true, I think this is definitely something up that road, but I just don't think that we're ready yet. And so what we've got to have is we've got to have a buy-in from an LLC standpoint of the tribe's going to have to set up an initiative for this because of so many moving parts and the upswing of it potentially having, you know, from the different byproducts that we can produce off of this machine. So it needs to be more of a business decision as opposed to a government entity or a government decision.

                                    And so I put LLC code there because obviously I just said that we've created one, and so that's definitely an option that we're looking at, and that may be the best option for us as far as just this project is concerned. However, that's where the other moving part comes in and where a joint venture for us may make sense underneath the LLC parent company and spinning off a subsidiary LLC, which would be a joint venture with Red Fern. And the reason why we'd have to do that is even though the tribe owns the studies from DEMD and the reports and everything that goes along with that, Red Fern pretty much has the technology in hand, and so they're the experts in the field for us. And so there's probably most likely going to have to be some form of a joint venture or there's going to have to be an outright buying out of Red Fern for the technology purposes.

                                    The reason why I put Boys Club there, Boys Club is our—it was a service set way back in like I think the '50s is whenever it was started, and it was actually done through the state. And it kind of laid in the weeds and nobody really thought about it as we started talking about Section 17 five years ago, and now all of a sudden it's come to the forefront. Well that charter was actually set up through the state. It's its own corporate charter, even though it's a 501(c)3. And what they do is they provide bus service for our local school. They also provide mechanic work for our local area and they also have charter bus service as well, and they provide most of the fuel for the tribal vehicle fleet.

                                    And so they have a lot of the technology that this wasted energy could utilize or even help kind of put out there. So we've put Boys Club in the mix because their current board, which is not necessarily a business-oriented board as much as it is a community board, though it is a legitimate board, because of the 501(c)3 they're kind of looking at that we could potentially change the structure so the Boys Club can be less of a breakeven 501(c)3. We could keep that arm of it, but we need to create an LLC part of it so that we can go after. So that's potentially another factor for us to exercise and look at to see if it's the way we want to take this venture. And so it's definitely an option.

                                    But I think what this whole time what I'm trying to get across is that with the project that we have there are so many different moving parts as far as the byproducts that are available is that we're going to have to look at a mix of a joint venture. We're also going to have to look at a mix of whether we do it with our tribal LLC or whether the Boys Club actually creates their own LLC and they kind of have that infrastructure that would be needed for this venture and there would be less buy-in from the LLC. So it's one of those things, it's kind of like a flip of the coin, but we're really not just flipping the coin; we've really got to see which one is going to make more sense. And that's where we are in our stage. And so it took a lot of planning to get to this point, but in reality we're kind of at that precipice, we've got to make that next step, and so what we're really trying to do is create a model that makes sense, that can be explained to our public but also can be explained to either our LLC board, which is pending, or the Boys Club pending board.

                                    And so at that point I've pretty much said all I need to say. I'll let Kevin kind of take over from here to kind of fill in any gaps that I've left.

Kevin Cornelius:        So part of the reason why we would look at a joint venture is, as I mentioned before, our system wasn't really designed to take tires, and working with the Tribe, we've modified it so we'll take tires. The Tribe collects 50 to 60 tons of tires and with the Tribe's help we've created a front-end system that will do a proper feed and when we distill the oil, as it comes out at the back end, you know, we're getting the naphtha, the kerosene, the gasoline, the diesel, and what that dose is tires are made with sulfur so that they don't catch fire. Because naphtha is one of our byproducts, we're able to separate and really get a clean sulfur. And that's got value; it's not a lot, but still, it's got value.

                                    So the point for us to work with the Tribe is our system can take 50 to 60 tons of tires per year, they have 50 to 60 tons of tires per year and they have a site where we can do it without having to go through a lot of hurdles. So it makes it beneficial for us because they have the site, they have the tires. We as a corporation can go through the state and get certified as a tire collection facility and therefore get reimbursed for the tires they collect, along with the selling of the byproducts. So it makes those benefits to us along with the Tribe.

Cameron Cooper:       And one of the things I forgot to mention is, and if you've kind of seen the vision here, if I've explained it well enough, is the ability to build capacity with this project. We're just solely talking about our waste stream on the Eastern Band of Cherokee Indians. So the 300,000 haul bill I was talking about earlier, that includes all the potential municipal solid waste we get now, that includes the tires we get now as well. And so in reality this is not including going out to the other surrounding counties and asking them to bring their waste to us to cut down on their haul bill, but on top of that, going ahead and collecting the tipping fees that they're currently paying. And we could charge them probably the same tipping fees that they're paying the Georgia landfill now and, you know, _____ _____, but it would still be cheaper for them because they're having to haul it less—or they're having to haul it less of a distance.

                                    And so, you know, that's just kind of where we're at in our business structure moving forward and what our options are. So, you know, as far as a case study I would like to say that we're in the infancy of looking at moving forward with a structure; however, our tribe is technically in infancy looking at that type of LLC. Though our casino has its own separate board and entity, you know, we've never expanded into looking at what seems to be the trend right now in Indian country, which is a diversification move. And so that's kind of where we're at.

                                    At this point I'll open the floor for questions, or anybody else that's on the panel or the panelists who want to have questions and we'll take it from there.

James Jensen:             Thank you Cameron and Kevin, that was excellent and a very interesting project. As you mentioned, yeah, we are now ready to go back to the questions. So please continue to submit any written questions you have and I'll start going through the ones we have here and address any ones that come in.

                                    So first off, and this is probably a question for Holland & Knight, and that is, "What depreciation is possible on tribal land projects?"

Tara S. Kaushik:         This is Tara—

Kenneth Parsons:       Go ahead.

Tara S. Kaushik:         Yeah, I'm sorry. Could we clarify depreciation of what sort of project? What assets are we talking about?

James Jensen:             Yeah. Yeah, I'm not sure here, but I assume it's, you know, talking about like the wind or solar project, it's the equipment that's installed. But maybe the questioner can clarify and we can get back to it.

Tara S. Kaushik:         That would be great. Thanks.

James Jensen:             I'll move on. Another question here, going back to Section 17, it says, "Can you explain that there are no codes for Section 17 that I could find. The only thing I think exists is the code itself as a lot _____ for the Section 17. Are there examples in which they can share?"

Kenneth Parsons:       Yes, I'd be happy to answer that one. So as I mentioned, there's no database of Section 17 corporate charters. There's just the statute, which came out in 1934, that's very sparse. It doesn't really tell you much about what a Section 17 can and can't do; that is negotiated between you and the Bureau of Indian Affairs when you submit your charter for approval. And so I can understand it's helpful to have a charter out there to be able to model off of. If the individual reaches out to me I can send the charter—I wouldn't say it's a model charter, but a sample charter that's generic and doesn't have any client information in it.

James Jensen:             Great. That sounds great. Thanks, Ken. Another question probably for Holland & Knight, "What type of structure supports a community-owned project?" So talking about like micro grids or solar—community solar projects.

Tara S. Kaushik:         There are a lot of different—you have more flexibility, I think, with solar projects, right? It really depends on what your goal is there. Is it the community to not only own the power, but to sell it or consume it within the community, or is it to be sold to someone else? It might be helpful to know a little bit more about it, but assuming that it's solar or micro grid, I would look to—solar and micro grid can be done relatively without too much regulations from the energy agencies. Assuming you're going to interconnect to the power grid at some point, you would need to deal with whatever utility has service to interconnect to the power grid.

                                    If you're looking to do a standalone and not connect to the power grid then perhaps I'd choose a more flexible entity structure, like a Section 17 or a tribal LLC. If you are going to connect to the power grid there are various options there that you could use a tribal authority if you want the government to be taking care of the resources and overseeing all of the daily operations. Otherwise I'd recommend probably going with one of the more flexible Section 17 or tribal LLC type structures.

                                    And Ken, feel free to weigh in there if you wish.

Kenneth Parsons:       That was perfect. Thank you.

James Jensen:             Great. Thank you. There's a couple more here. As more questions come in I have to find my previous question, so a little bit hard for me to find them clearly—cleanly. Any word about ICOs? So I guess I'm not 100-percent sure what they're referring to. Is that Initial Coin Offering or some jargon I'm not familiar with? Anybody able to answer that, ICO? Any information on ICO?

Tara S. Kaushik:         I'm not sure if that's referring to like the financing process or capital-raising process, or even some of the references to blockchain recently. But it's not—

James Jensen:             So they can clarify it if—

Tara S. Kaushik:         Yeah. I mean it's not something that I can opine on sort of in the dark. I'd love to know more about it and then talk offline about it, so I definitely encourage you to ask questions offline if you want to e-mail us at anytime. We're always happy to talk about projects with you. It's something that Ken and I love doing, so.

James Jensen:             Great. Thanks, Tara. Is there a tribe that is currently operating a tribal electric utility and/or solar utility that is currently producing 10 megawatts now? I guess that's a broad question, but—

Tara S. Kaushik:         Yeah. Yeah, okay. So in terms of tribal utilities, a number of tribes have formed that. You're asking specifically about solar generation? The one that immediately comes to mind is the Navajo Tribal Utility Authority, NTUA, who I know has several solar projects that it's working on, the largest being in Kayenta, where I believe—I can't recall if it's something like 250 megawatts or something slightly smaller than that. But I thought it was a phased project that it's going to produce quite a bit of solar generation.

Kevin Frost:               I'd also like to add—this is Kevin Frost—that if you want to find out anything about some of the projects that we do also through the Office of Indian Energy you can visit our website at Energy.gov/IndianEnergy and from the dropdown menu you can look under Projects and peruse and see which projects you might want to compare and contrast or to do any other information or look at any other information that you deem necessary to help guide any of your future projects or answer any questions.

James Jensen:             Thank you, Kevin. So we did get a clarification on that depreciation question and we're referring to equipment such as solar panels or wind turbines. So it's a pretty broad question, what sort of depreciation is available on tribal land for wind and/or solar equipment or presumably any other project-related equipment?

Tara S. Kaushik:         So I mean there's commercial depreciation under the investment tax credit, which I'm assuming that question is referring to. Currently at 30-percent that's going to phase down after 2019. What I'm going to suggest is if the question asker is willing to e-mail Ken Parsons and me their specific questions as to the projects they're looking at, for the ITC it would need to be renewable energy project, it would need to be especially solar. For ITC the protection tax credit is a whole other different credit, and as I understand it may have expiration dates that already occurred. So I mean it's something that we want to sort of pinpoint according to what your project is, and if you're looking at the federal tax credits or other types of depreciation-minded subsidies.

                                    So feel free to e-mail me at Tara.Kaushik@HKlaw.com and I'm happy to answer that question for you.

Kenneth Parsons:       You can also e-mail me at Ken.Parsons@HKlaw.com. And just to add some on the depreciation question, it could be referring to accelerated depreciation. You know, for some types of property there's 100-percent accelerated depreciation, although the recent tax reform also allows the immediate expensing of 100-percent of the cost of certain qualified property placed in service after September 27, 2017 and between January 1, 2023. So depending on what you're talking about, if it's like business-type property, that could apply too. So that's the only other thing that rang a bell on depreciation.

Tara S. Kaushik:         Yeah, thanks, Ken. That's really helpful. And please do feel free to e-mail both of us.

James Jensen:             Great. Thanks, Ken and Tara. And I've brought up the slide with everyone's e-mail addresses for reference.

Tara S. Kaushik:         Thank you, James.

James Jensen:             Let me share that. Yeah.

                                    A question for the Eastern Band Cherokee project, how soon are you ready to commercialize?

Cameron Cooper:       I think initially as soon as we get the LLC or whatever structure we're going to go within place. I'd say we're within a year of making sure that the market—that we vet the market out there who would buy the byproducts, to make sure that we have a quality product to sell and make sure that we have vendors out here in our area that are willing to buy those products. I think once we have that year underneath our belt, I'd say that within two years after that they should be—we would move from a 100-pound unit up to one-ton units. And I think the overall initial business plan would be that we would own three one-ton units. This would just be for our area, for our purposes at this point, before we'd make it mobile or anything of that nature. And we would own three one-ton units: one devoted to tires, one devoted to plastics, and one devoted to municipal solid waste, and each one would have their own form of byproducts.

                                    So I think commercialization is just right around the corner, as soon as we have a structure and we can get an LLC or the Boys Club to buy into that structure.

James Jensen:             Great. A few more questions on the details of the project. And if you don't want to make it public that's certainly understandable. But how much did it cost to build the system and how much electricity is it producing?

Cameron Cooper:       I'll let Kevin answer that one.

Kevin Cornelius:        Yeah. We don't really want to talk about how much it cost us. For a 100-pound unit, tires, we can produce right around 54 to 55 kw of energy. The system uses 12 kw. And if we added a second unit of that size then—it's about 54 kw off of 100 pounds of tires.

James Jensen:             Great. Thank you. Just going through our questions here. Here's another question probably for Holland & Knight. If we establish our own tribal electric utility are there steps to secure our WAPA allocation that is currently being provided to area co-ops as an indirect allocation? And maybe you are or are not familiar with the WAPA allocation.

Tara S. Kaushik:         I am familiar with that and was part of those negotiations for the recent Hoover Dam contract, so I'd say it highly depends on what the contract says. That's something that you want to go ahead and look at, especially on the provisions about the resale of power and also as to how your entity was named in the contract. I'm going to stop there because I don't want to get into providing any legal advice; we're not trying to do that in a public forum here. But I would encourage you to go ahead and e-mail me if you'd like further detail on that.

James Jensen:             Great. Thanks, Tara. Another question here, and I think the question is referring to the Eastern Band of Cherokee project, but it says, "Do any of these type of projects qualify for carbon credits and who can use them?"

Kenneth Parsons:       Yeah, they do qualify for carbon credits. Tires are considered biomass, so we'd be able to qualify for whether it's the oil or the gas consumption.

James Jensen:             Great. Thank you. Sorry, I've got a lot of answered questions here. I'm trying to find the ones that are left.

                                    All right, I think—with that said, I think we have all the questions that are answered. And outside the general questions, a reminder that the audio recording will be available on the Internet, and I'll bring up the slide here that shows the address. And about a week from now that should be available, so both the slides and the audio recordings will be available there. And like I said earlier, I really encourage people to utilize that, because there's a lot of good information here that, you know, is probably best absorbed after listening to it a couple times.

                                    So with that I thank all of our presenters for today's valuable and informative presentations. In general we are interested in receiving feedback and suggestions on this webinar series and so please feel free to reach out and share your feedback.

                                    We have an upcoming series of webinars, and here's a list of them. Sorry. The next one here in May is Understanding Your Power Grid and Organized Energy Markets.

                                    So with that I thank all of our presenters and I thank the attendees for your time and interest. Thank you very much and have a good day.

Tara S. Kaushik:         Thank you very much. And thanks to _____ _____.

Kevin Cornelius:        Thank you.

Cameron Cooper:       Thank you, everybody.

Kenneth Parsons:       Thank you, everyone.

[End of Audio]