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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2019

Vol. 24, No 3 Week of January 27, 2019

New option for pipeline

Indigenous communities explore ownership stake in stalled Trans Mountain pipeline

Gary Park

for Petroleum News

The largely quiet majority of aboriginal communities in British Columbia and Alberta who support expansion of the Trans Mountain pipeline have made a dramatic entry into the dispute by disclosing they are working on plans to buy an ownership stake in the project.

Dozens of the 130 aboriginal communities who are members of the Indian Resource Council are exploring ways to raise billions of dollars in financing to become equity partners in the 890,000 barrels-per-day transportation system to carry oil sands bitumen from Alberta to a terminal in Vancouver for export to Asia.

How much would be needed to achieve that goal has not been disclosed, although analysts have put a preliminary price tag on the overall cost of the TMX undertaking at C$14.5 billion - C$4.5 billion to buy out the Canadian government’s control of the existing 290,000 bpd pipeline and C$9 billion to pay for the 600,000 bpd expansion.

Approaches have reportedly been made to capital markets, banks and governments, as well as the petroleum industry, infrastructure players or institutional investors such as the federal government’s massive Canada Pension Plan.

Opportunity

The Indian Resource Council, at a mid-January meeting in Calgary, represents First Nations who own oil and gas assets and has been eager to pursue the idea of purchasing a stake in Trans Mountain.

Delbert Wapass, a former chief of Saskatchewan’s Thunderchild First Nation, said now that the Trans Mountain plan is at a tipping point indigenous people “have an incredible opportunity to create a new way of looking at this pipeline.”

“I believe it is time we have a louder voice, a collective voice, in this pipeline’s impact,” he told the assembled chiefs. “Ownership means empowerment, opportunity and shared responsibility.”

Richard Betsalel, a managing director for Toronto-based advisory firm Crosbie & Co., said that if indigenous communities are willing to accept cash flow greater than their debt costs they can make an investment work.

He told the Globe and Mail that such an objective can enable First Nations “to put the money into their communities for economic development and other projects.”

Earlier participation

The strategy has already been successful for a number of First Nations who have participated in energy projects over the past decade, including the purchase of oil and gas infrastructure, notably by Alberta’s Miskew Cree and the Fort McKay First Nation who acquired 49 percent of an oil sands storage facility from Suncor Energy for C$503 million.

It was just the latest such deal by the Fort McKay community, which has led the way in linking up with the energy industry and, in the process, achieved an unemployment rate of nearly zero percent.

In Ontario, 129 First Nations, nearly all of Ontario’s indigenous groups, currently own 2.4 percent of Hydro One, the province’s electrical transmission company.

They hope to eventually use cash from their ownership stake to pay off the initial investment.

First Nations have previously become partners in the now-shelved Mackenzie Gas Project and are 100 percent owners of Eagle Spirit Energy, which is seeking financial help to launch a bitumen pipeline from northern Alberta to Prince Rupert and has total aboriginal backing along the route.

In addition, the risk rating for operating tankers out of Prince Rupert is very low, thus avoiding a major obstacle facing the TMX.

But Eagle Spirit President Calvin Helin has threatened to move the export terminal to Alaska if the Canadian government implements its plan to ban tankers from loading on the northern British Columbia coast.

Eagle Spirit plans an initial export phase of 2 million bpd at a cost of C$12 billion, then would add a second bitumen pipeline and two LNG lines for C$4 billion.

Anti-pipeline activists

However, regardless of the optimism building around aboriginal participation in pipelines, the leading anti-pipeline activists led by Greenpeace, the Wilderness Committee, the David Suzuki Foundation and Stand.earth show no signs of backing down from their claims that no groups have suffered more from talk of resource ventures than First Nations.

Greenpeace said the Canadian government put itself on a “collision course” with indigenous rights last May when it bought the existing Trans Mountain pipeline from Kinder Morgan for C$4.5 billion along with the expansion plans.

That view aside, the opponents of resource development have ignored the fact that there is more support for TMX than opposition among First Nations based on C$40 million worth of mutual-benefit agreements signed by Kinder Morgan with aboriginal communities.

New poll results

They have also paid no heed to a new poll released on Jan. 16 by Angus Reid Institute that reflects an understanding of the economic imperative of building energy infrastructure in Canada.

The results capture a public opinion endorsing new oil pipelines, with the exception of Quebec, where resistance remains strong.

Institute executive director Shachi Kurl said the poll “shows an increased sense of urgency and anxiety” that extends beyond Alberta and Saskatchewan.

“There seems to be a greater sense among Canadians that this is no longer just an issue of environment versus oil companies or pro-oil workers. This is now an issue of Canada’s economic interests,” he said.

The online survey of 4,024 Canadians found almost 60 percent - including 87 percent in Alberta - believe the lack of new pipelines is a crisis. Even in British Columbia 53 percent consider the situation a crisis.

Rift in ranks

For all of their apparent shift towards a pro-industry stance, First Nations face a rift within their ranks, culminating earlier in January in a blockade that stopped work on the 400-mile Coastal GasLink pipeline which will deliver feedstock to the liquefaction plant at Kitimat for the C$40 billion LNG Canada project.

Ignoring a court injunction, Wet’suwet’en First Nation hereditary chiefs cut off access to worksites on their claimed territorial land, resulting in a standoff with the Royal Canadian Mounted Police who ended up arresting 14 protesters.

The chiefs finally struck a deal with the RCMP, allowing TransCanada to resume survey work, while insisting that did not extend to permission for pipeline construction work to proceed.

It is far from clear how the uneasy truce will resolve itself, although the outcome will play a crucial role in the future of Canada’s resource sector.






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