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Canada’s aboriginal businesses want share of Arctic oil and gas boom After two decades of economic depression, Canada’s Inuit leaders scramble to get joint ventures set up with outside oilfield service firms Gary Park PNA Canadian Correspondent
Canada’s North is on the verge of an investment boom that it hopes will translate into money, business opportunities and thousands of jobs in an economically depressed region where unemployment in some communities hovers around 40 percent.
One report by the Canadian Energy Research Institute says a gas pipeline from the Mackenzie Delta could create 11,000 construction jobs.
Others have estimated that spending on a pipeline alone could run from C$2.3 billion to C$8.1 billion.
It’s a time of great hope and growing tension as the debate on the timing and routing of pipelines waxes and wanes.
But there is also a sense of realism among Inuit leaders, who have languished for more than two decades, waiting for the return of energy explorers who held out the promise of a rich future, only to leave as abruptly as they came.
Pipeline moratorium ended 1970’s boom Nobody’s forgotten the last boom that went bust in 1977 with the announcement of a 10-year moratorium on pipeline development while aboriginal land claims were settled.
Exploration companies blew out of the region faster than the wind from the Beaufort Sea sweeps on to the Delta. They left behind heaps of rusting machinery and shattered dreams.
“The last time around when they were up here oil companies spent C$5.3 billion and much of it went south,” said Fred Carmichael, president of the Gwich’in Tribal Council.
“They brought in their own trucking companies, their own catering, their own air support and bypassed businesses in the North. I witnessed all that. This time around it’s a different story. We are the landlord and we will see to it that our people benefit.” Inuvialuit Regional Corp. now power center A 1984 land claim agreement with the Canadian government has made the Inuvialuit Regional Corp. the power center in resource development and land management for about 5,000 Inuit.
To ensure native people share in development riches, the IRC is giving preference to Inuvialuit service companies over southern competitors in bidding for contracts with exploration firms.
The IRC also has a business arm, the Inuvialuit Development Corp., to foster local businesses of its own. It has set up 32 businesses ranging from environmental services to transportation. The result is that southern service firms must form joint ventures with the IDC or other new local players.
In the process, the IRC has attracted muted complaints from southern companies and even private Inuit-owned firms. Charges that “sham” companies are being set up as Inuvialuit businesses, just to gain preferred treatment in bidding for contracts, have forced the IRC to hire an investigator.
But Nellie Cournoyea, the IRC chairwoman and a driving force for 20 years in negotiating land claims, is not about to feel remorseful.
“Many of the older people were feeling very negative about the oil and gas industry,” she said. “People just got fed up and said, ‘We’d better stake our land claim and get it done; get something in place that would legitimize the owner.’
“When the industry came back this time we wanted to meet it by building partnerships. The Inuvialuit want to be involved as businessmen, as employees and as owners.”
To that end the IRC has build an asset base valued at about C$280 million and last year negotiated C$75 million in bonus payments from energy firms that bid to secure exploration rights.
Long-term job skills promoted Recognizing that gas exploration and pipeline construction offer only temporary employment, Cournoyea is promoting the development of long-term job skills.
The IRC lists welders, heavy equipment operators, cleaners, drivers, electrical trades, carpenters, mechanics and cooks as people who will be in high demand to serve the industry.
The rapid emergence of aboriginal businesses is seen across the Canadian Arctic.
ADK Holdings in Fort Liard, the emerging new gas frontier in the lower Northwest Territories, oversees daily operations for a group of resource-related aboriginal companies that generated C$38 million in revenues in 2000, about C$10 million of which was paid out in wages to members of the 500-strong Acho Dene Koe Band.
One of ADK’s subsidiaries, Beaver Enterprises, provides the heavy construction work that energy exploration firms require.
It is now viewed as the model of how virtually all tasks related to the oil and gas sector can be provided by even the smallest community.
“We have some very skilled employees,” said ADK general manager Shane Parrish. “If we have fallen short in filling staff requirements locally it’s because we’ve been very aggressive in going after work.
“It’s tough doing business in the North, it’s tough for an aboriginal band to have sustained success,” he said. “But I think it’s working for ADK because they are also tough on themselves and they treat this as a business. They know that if it’s not profitable, they can’t achieve their other goals.” Joint ventures in drilling That pursuit has resulted in joint venture partnerships in drilling operations with Akita/Sahtu Drilling which owns and operates a 2,800-meter capacity rig in the central Mackenzie Valley and a helicopter service.
It is also negotiating pipeline deals with Westcoast Energy and Shiha Energy Transmission, including partnerships in gas gathering, processing and transportation that may generate C$30 million of operational spending.
Another new arrival is the Arcis Corp., which has just entered into a cooperation and business terms agreement with the Nahanni Butte Band, a member of the Acho Dene Koe.
Arcis will work with the band to conduct seismic surveys on the band’s traditional lands at a cost about C$15 million over the next two years.
The projects will be owned and operated by Arcis and the data will be available for sale to oil and gas customers, with the band receiving a royalty based on revenues generated from the sales of seismic data licenses.
The Nahanni Butte area is a northern extension of the geology of the Fort Liard region, which has yielded a number of Significant Discovery Licenses and is now producing at 50 million cubic feet per day.
The convergence of southern expertise and aboriginal enterprise also made strides in early April with Ensign Resources Service Group, Canada’s second-largest driller, teaming up with an Arctic investor to create a company to explore the region.
Ensign will own 49 percent of Arctic Ensign Drilling, with the balance held by Gwich’in leader Fred Carmichael, a former vice chairman of the Inuvialuit Petroleum Corp. and a director of Inuvialuit Energy.
Arctic Ensign will build and operate specially designed northern drilling rigs. The first is expected to be working by spring 2002.
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