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

Vol. 24, No.15 Week of April 14, 2019

New pipeline player

First Nations prepare possible bid for majority stake in Trans Mountain pipeline

Gary Park

for Petroleum News

Canadian First Nations have wasted no time seizing on a federal government invitation for indigenous communities to enter discussions and possibly negotiations to take a 51 percent ownership stake in the existing and expanded Trans Mountain heavy crude pipeline.

No sooner had Finance Minister Bill Morneau unveiled the principles for indigenous participation in the planned 890,000 barrels per day transportation link from Alberta to the Pacific Coast than a First Nations-led group declared its interest in buying a 51 percent share.

All First Nations in British Columbia, Alberta and Saskatchewan have been invited to join the C$6.8 billion expansion, which would raise Trans Mountain’s value to about C$13 billion.

The bid is being assembled by Delbert Wapass, former chief of the Thunderchild First Nation in Saskatchewan and current vice-chairman of the Indian Resource Council, which looks for opportunities to link up with projects.

Project Reconciliation

Called Project Reconciliation, the group has assembled a team of indigenous and non-indigenous executives with experience in oil and gas, capital markets, business development and indigenous relations, Wapass said.

He said the objective is to gather support from major Canadian banks to lead a syndicated debt issue to finance the takeover of Trans Mountain and a share of the expansion costs.

The secured debt would cover long-term shipping contracts that oil producers have signed with Trans Mountain, as well as guarantees that governments have offered to pay construction costs (Alberta has committed up to C$2 billion for any cost overruns), thus eliminating the need for taxpayer subsidies or upfront payments by indigenous communities, the project said.

Wapass told the Globe and Mail that his group is aware that the Canadian government bought Trans Mountain last year from Kinder Morgan for C$4.5 billion, with the understanding - as confirmed by Morneau - that the asset would eventually be put back in private hands.

He said the proposal is at a “very advanced” stage, although Morneau said the sale of the pipeline depends on when the venture is “de-risked,” which in turn can’t be resolved until consultations with indigenous groups are completed.

Meaningful economic participation

Morneau told reporters in Calgary that indigenous ownership can only proceed if the communities would have “meaningful economic participation,” if a deal could proceed in the spirit of reconciliation and if the resulting entity worked for the benefit of all Canadians on a commercial basis.

Project Reconciliation has taken its lead from a 2017 deal that resulted in Alberta’s Miskew Cree and the Fort McKay First Nation buying 49 percent of a Suncor Energy oil sands storage tank for C$503 million - a transaction that was financed through a high-yield bond issued to more than a dozen investors.

Despite the enlistment of leaders from several leaders of oil and gas investments by indigenous communities, many First Nations will not be swayed by the initiative.

Grand Chief Stewart Phillip of the Union of British Columbia Indian Chiefs said he did not care who owned or held a stake in the pipeline.

He said the project is detrimental to the Pacific marine ecosystem and poses a threat to killer whales and wild salmon.

Wapass countered that Trans Mountain represents an opportunity for indigenous people to realize that the environment and the economy don’t have to be at loggerheads.

Naomi Sayers, an indigenous lawyer in the energy sector, wrote in the Globe and Mail that she is “inspired by the possibilities,” noting that the project could see five indigenous groups making a bid.

“I am excited to see indigenous stakeholders taking their seat at the table instead of waiting to be invited,” she wrote.

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