Ottawa’s $40M gift to two First Nations
Stake in coal termi nal signals ri sing cost of soci al lic ence
• In a highly unusual move, the federal government gifted a $ 39- million stake in a B.C. coal terminal to two First Nations communities, perhaps signalling the rising cost of winning Indigenous support for natural resource projects.
The Canada Development Investment Corporation ( CDEV) announced in July that it had transferred a 10 per cent stake in the publicly-owned Ridley Terminals facility to the Lax Kw’alaams Band and the Metlakatla First Nation, whose people reside near Prince Rupert on the northern B.C. coast. Finance officials confirmed there was “no payment associated with that transfer.”
The transfer comes after the two Indigenous groups were set to be major beneficiaries of a liquefied natural gas project that has since been scrapped.
The decision by Ottawa to give away a stake in a taxpayer- owned asset could play into a broader debate over First Nations communities and the extent to which governments should support their entry into the natural resources sector. Indigenous communities have long claimed that resource extraction has interrupted their traditional way of life while also hurting their communities and economy, and have called on the government to make amends.
Prime Minister Justin Trudeau has made reconciliation with First Nations a central part of his political mantra in recent years, and has said he aims to build a “legacy” of improved relationships between Indigenous people and Ottawa.
While there are numerous examples of First Nations buying stakes in natural resource assets like oil pipelines or storage containers, the Ridley Terminals transfer appears to mark a departure from the traditional structure as it did not require an equity payment from the community.
On July 11, CDEV announced that 90 per cent of the Ridley Terminals, owned by Canadian taxpayers since the 1980s, was sold for $350 million to a joint venture between private companies Riverstone Holdings and AMCI Group. The value of the other 10 per cent stake to the two Indigenous groups would be worth $38.9 million.
Marie- France Faucher, a Finance spokesperson, said in a written statement that Canada has in the past “provided different forms of economic benefits to indigenous communities as part of commercial transactions.” She said the terms of those agreements have always been “unique” in nature.
She said First Nations had supported the sale of the Ridley Terminals and that this “support was important for a successful transition and thereby helped to maximize value to Canadians.”
The gift to the two First Nation communities comes after they lost out on a major LNG project.
Both the Lax Kw’alaams and the Metlakatla were set to be major beneficiaries of the $ 36- billion Pacific Northwest LNG project, which was planned for construction on Lelu Island, just south of Ridley Terminals.
The Lax Kw’alaams was at first opposed to the project, and rejected a combined $ 1.2 billion cash- and- land offer from the provincial government and Petronas, the project’s Malaysian proponent, in exchange for its support of the facility.
The community later changed its position on Pacific Northwest after electing a new mayor and in February 2017 signed a deal with the province for $98 million in cash, several chunks of crown land and a $1.4 million annual revenue-sharing agreement.
The Metlakatla at the same time signed a similar agreement worth $46 million in cash and other payouts.
But months later, Petronas scrapped the project, citing “changes in market conditions” after years of regulatory and legal delays.
Meanwhile, the rival $39-billion LNG Canada project in nearby Kitimat, B.C., headed by Royal Dutch Shell, was given the green light in December 2018. Both the Lax Kw’alaams and Metlakatla have signed much more modest agreements with the provincial government on LNG Canada, which lies farther from its traditional lands.
According to media reports, neither the Lax Kw’alaams nor Metlakatla has received land deals with the provincial government on LNG Canada of the sort offered on Pacific Northwest, and annual revenue- sharing agreements are far lower at $ 336,000 and $280,000 per year, respectively, based on the project’s export capacity.
A year after Pacific Northwest was cancelled, the federal government announced that it had been in contact with First Nations communities near Ridley Terminals, and that it would begin seeking a buyer for the asset. Transport Minister Marc Garneau said in a statement at the time that Ottawa would pursue the sale to “advance reconciliation and to renew the relationship between the Crown and Indigenous peoples in Canada.”
Lax Kw’alaams chief John Helin and Metlakatla chief Harold Leighton did not respond to repeated requests for comment.
The inclusion of First Nations on natural resources projects has become increasingly important in securing so- called “social license” to build major projects. Lack of Indigenous support has led to extended delays on many major projects in Canada, from oil pipelines to power lines.
“If you built a coal port on First Nations land today, you’d have to pay handsomely for that,” said Ken Coates, a professor specializing in Aboriginal rights at the University of Saskatchewan. He stressed that he was not speaking to the Ridley Terminals project specifically.
Indigenous groups have been increasingly buying stakes in natural resource projects as a way to reclaim autonomy and generate wealth on their own, he said. Several First Nations have proposed buying a stake in the Trans Mountain expansion project, for example, while the Fort Mckay First Nation in Alberta bought a $350-million stake in a private oil storage facility in 2016.
“From the First Nations’ point of view, sometimes it gets them a seat at the table,” Coates said.
CDEV acts as a financial holding company for a number of Crown corporations, including Trans Mountain Corp., which operates the Trans Mountain pipeline.
Ottawa has also negotiated separate agreements with the Gitxaala Nation, the Gitga’at First Nation and the Kitselas First Nation related to the sale of Ridley Terminals. It is currently in talks with the Kitsumkalum First Nation for an agreement.
The Canadian government built the coal export terminal in the early 1980s for about $250 million. Over the years Canada used the facility to ship both metallurgical coal, used in the manufacture of steel, and thermal coal, which is burned to generate electricity.