ENERGY SECTOR WARMING UP TO ABORIGINAL PARTICIPATION
But failure of projects could close window of opportunities, writes Claudia Cattaneo.
Equity participation by aboriginal communities in resource projects is increasingly held up as the key to winning their support.
The latest energy industry leader to recognize the benefits is Ian Anderson, president of Kinder Morgan Canada Ltd., who in Calgary this week said he's open to the idea of aboriginal equity participation in the embattled Trans Mountain pipeline expansion. “I worked for a long time, quietly, to try and assemble support for that on this project,” he said at a conference organized by the Global Petroleum Show. “It didn't come to fruition. I have never ruled it out.”
It's indicative of a big evolution in energy business thinking, which not too long ago regarded such giveaways as negative for shareholders' interests.
Kinder Morgan, too, was unenthusiastic about equity participation in the early days, arguing it was difficult to pull off for its Trans Mountain expansion project because it was built on an existing system. Instead it offered other benefits to impacted aboriginal communities like procurement, jobs, education and revenue sharing.
The growing list of proposed project failures, due in part to aboriginal pushback, has lined up shareholder interest with those of aboriginals. Failed projects cost time, money and reputation, making aboriginal peace a top objective.
Joe Dion, chairman and CEO of Frog Lake Energy Resources Corp., an oil and gas company wholly owned by the Frog Lake First Nation in Alberta, said it's time for aboriginals to embrace the new reality and seize opportunities that could alleviate poverty and accelerate their economic reconciliation with the rest of Canada.
“Industry is finally saying: ‘How do we work with you?'” Dion said at the same conference. “The easiest thing to do is to protest and oppose. But I think there is an opportunity to work with projects, governments, and take leadership.”
Besides, aboriginal ownership could go a long way to breaking up the alliance between aboriginals and environmental organizations over proposed pipelines.
As JP Gladu, president and CEO of the Canadian Council of Aboriginal Business, noted: “We know where we get indigenous communities totally on a project and part of it, the last we are going to be doing is protesting against ourselves.”
Indeed, Dion believes that “the environmentalists have hijacked the aboriginal agenda” and “we need to take that back.”
So far, aboriginal equity participation in Canadian resources has had mixed results.
It didn't help to save projects like the Northern Gateway oil pipeline or the Mackenzie gas pipeline.
Enbridge Inc. proposed to increase equity ownership and even hand over control of Northern Gateway to aboriginals after recognizing the project needed to better reflect their needs and views. Right from the start, those on the pipeline right of way were offered a 10 per cent equity stake, as well as jobs and business opportunities associated with construction, and the majority took the offer. But the improved offer came too late, after opposition had galvanized, and the project was eventually killed by Prime Minister Justin Trudeau.
Imperial Oil Ltd. and its partners immediately offered a one-third interest in the Mackenzie Pipeline to the Aboriginal Pipeline Group, but the project remains on the shelf after the economic case collapsed due to a long regulatory review. One aboriginal group, the Deh Cho, used its opposition as leverage to settle a land claim with the federal government, contributing to the pipeline's challenges.
In the case of Trans Mountain, Anderson said he welcomes First Nations investment now that Kinder Morgan Canada has been spun off from the Houston-based parent and its stock is publicly traded.
But he said it's difficult for First Nations to come up with significant cash of their own to buy equity, and governments should look “at what they can do to help … those kinds of investments, either through loan guarantees or the sort.”
There are many examples of success, too, and more are needed to change attitudes and beliefs. They include Suncor Energy Inc.'s recent equity partnerships with the Fort McKay and Mikisew First Nations. Last year, the oilsands giant sold 34 per cent of its $1-billion storage facility to serve its Fort Hills oilsands project for $350 million to the Fort McKay band, and a 14.7 per cent stake of its East Tank Farm to the Mikisew Cree First Nation for $147 million. Dion's own company stands out as one of the many models of successful aboriginal ownership.
Now that it's open, the window for First Nations to participate in the energy economy won't be available forever.
Obstructionism may have resulted in gains that aboriginals couldn't have obtained otherwise. Yet it's obvious that if the Trans Mountain expansion is allowed to fail, the lineup of proponents of energy project will get thinner, meaning fewer opportunities to protest — or to benefit.