First Nations look to boost investments in Canadian oil, gas projects

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A number of Canadian First Nations are using their clout with regulators to make inroads in oil and gas projects in an effort to enrich their bands and help their people get good jobs and start businesses in the energy industry.  Seven Generations photo.

A number of Canadian First Nations are using their clout with regulators to make inroads in oil and gas projects in an effort to enrich their bands and help their people get good jobs and start businesses in the energy industry.  Seven Generations photo.

Canada’s First Nations shifting to active role in energy industry

A report by Reuters on Thursday highlighted some Canadian First Nations’ move from a passive role in the energy industry to players, buying oil wells and negotiating stakes in proposed pipelines and storage projects.

In 2016, Chief Isaac Laboucan-Avirom, leader of Alberta’s Woodland Cree Nation, signed an agreement with Baytex Energy Corp to drill on the band’s land in exchange for modest royalties and jobs for band members.

The Baytex deal has shown other bands how to balance economic prosperity with environmental stewardship.

“There’s been a real awakening,” Laboucan-Avirom told Reuters.  He says he is looking for further investment in oil and gas assets. “Everything in our world is touched by oil and gas, whether we like it or not.”

Companies joining forces with First Nations will benefit from added investment and clout with the country’s regulators.  First Nations in Canada must be consulted and accommodated by governments and companies before projects affecting their territories are approved.

Ken Coates, professor at the University of Saskatchewan says this law gives bands “pretty close to an effective veto”.

As a result, some bands have been able to stop or delay energy projects, including the proposed Northern Gateway pipeline which was rejected by the Trudeau government in 2016.  First Nations raised environmental concerns over the project.

But some bands are opting to use their power to negotiate with energy companies for ownership stakes in projects, unlocking oil and gas reserves that could be stuck in the ground without First Nations approval.

“It’s assets that create cash flow,” Joe Dion, Chief Executive of First Nations-owned Frog Lake Energy Resources Corp told Reuters.  The company produces 2,000 barrels of oil per day. “We get a piece of the action.”

Within the bands, members are split on whether or not to develop vast and valuable resources located on traditional and tribal lands.

Aboriginal Canadians make up about 5 per cent of the population.  They face much higher levels of poverty which gives bands incentive to tap their energy resources to boost their standards of living, but not everyone sees benefits to developing their resources.

“It’s so polarized,” Stephen Buffalo, chief executive of the advocacy group Indian Resource Council told Reuters. “Some want to see the benefit, others think it’s going to kill the earth.”

Frog Lake Energy Resources Corp is owned by the Frog Lake First Nation in Alberta.  Joe Dion says the band is looking to buy more oil-producing properties located beyond its reserve boundaries as well as stakes in tank farms and pipelines.

“The revenue-sharing piece is here now,” Dion said. “That is where we have to go.”

According to Mark Saar, North American head of project finance for RBC Capital Markets, more pipeline and storage companies are engaging in financial partnerships with First Nations.

Saar says RBC recently completed a $545 million bond issue for the Fort Mckay and Mikisew Cree bands. This is the largest ever private investment by a First Nation and allows them to buy up to a 49 per cent stake in a storage facility by Suncor Energy.

“The deal was oversubscribed,” Saar told Reuters. “We think there would be appetite for further similar deals.”

Mohawk aboriginal and Chief Executive of Bridging Finance, David Sharpe, says investors and lenders are showing “greater acceptance of First Nations as players”.

Last year Sharpe’s company financed one band’s purchase worth $11 million of stakes in producing oil wells.  According to Reuters, the unnamed band is pursuing four more similar deals.

One of Canada’s richest families, owners of the Aquilini Group, is working with AltaCorp Capital to raise money for the proposed $16 billion Eagle Spirit oil pipeline that would carry Alberta crude to the northern BC coast.

So far, 35 First Nations have agreed to allow the project to access their land.  In exchange, the bands will own at least 35 per cent of the pipeline and a corresponding share of the profits, according to Reuters.

The Eagle Spirit pipeline could be a vital transportation link for crude from the Alberta oil sands to tide water.  Currently, Canadian crude is selling at a steep discount against US West Texas Intermediate because of transportation constraints.

Calvin Helin, President of Eagle Spirit and a member of the Tsimshian First Nation, says the project has strong interest from energy companies and investors.

The Woodland Cree and Chief Isaac Laboucan-Avirom have granted Eagle Spirit pipeline permission to use its land, in exchange for an undisclosed ownership stake.

However, a major roadblock is a proposed government moratorium against oil tankers traveling along the northern BC coast.

Some aboriginal bands have thrown their support behind two other private investor groups looking to build railways from the Alberta oil sands to Alaska.  This project would avoid the BC coast and its local opponents to energy projects.



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