First Nation, Suncor strike $350M deal

In what has been hailed as a rare deal between First Nations and industry, oilsands giant Suncor Energy Inc. will sell a stake in a bitumen storage terminal in northern Alberta to Fort McKay First Nation for $350 million.

The indigenous group will acquire 34.3 per cent of Suncor’s East Tank Farm project, which will store, cool and blend bitumen from the Fort Hills mine north of Fort McMurray before transporting it in pipelines.

Mark Little, an executive vicepresident at Suncor, said the Calgary-based producer will secure far more than money when the deal is finalized, expected in the second quarter of 2017.

“If our entire business and focus was just about making money, we wouldn’t do this; we’d just say, fine, we’ll keep it to ourselves,” Little said in an interview.

“We view it as hugely advantageous to be aligned with a First Nation moving oilsands forward in this country, and you know there’s lots of controversy about that.

“But it’s also, shouldn’t we be concerned about the First Nations in this country, their living conditions, and are we providing the right support?”

Chief Jim Boucher of the Fort McKay First Nation said the acquisition is a “prudent investment decision” at a time that his members are struggling with high unemployment.

The purchase price of $350 million represents the actual construction costs of the share that the First Nation is acquiring in the $1-billion storage facility. The deal, which the aboriginal group is financing by issuing bonds, comes at a period of depressed costs during the oil rout.

The storage facility will handle crude from the $13.5-billion Fort Hills project, in which Suncor owns a majority stake. It’s expected to begin producing oil late next year.

“We’ve been engaged in the business of the oilsands for the past 30 years,” Boucher said. “Our continued involvement is assured through this investment.”

The size of the deal is rare for First Nations in Canada, Suncor and Fort McKay officials said.

In 2003, Inuvik-based Aboriginal Pipeline Group secured a one-third stake in a multibillion-dollar pipeline project that would ship natural gas from the Northwest Territories to northern Alberta.

Imperial Oil has secured permission from the National Energy Board to delay construction on the Mackenzie Gas project until the end of 2022 due to low gas prices. The Trudeau government is expected to make a final decision by the end of the month.

The Fort McKay First Nation has a reputation for having close ties with industry and, according to its chief, for “ensuring our interests are protected.” While pipeline projects in Canada face opposition from First Nations and non-indigenous alike, Boucher believes the best way to transport oil is through pipelines.

The First Nation operates 10 companies involved in servicing the oilsands, such as camp catering, truck driving and operating heavy equipment. But the indigenous group has raised concerns with Suncor that its margins are being squeezed on the services it provides the producer as the oil price rout forces prices lower.

“When we started sharing each other’s issues and challenges, we wanted to make sure we’re not overpaying for anything,” Little said.

“We eventually led to this type of an investment.”