Blog: New push for Indigenous-equity loans

Campaigns for federal loan-guarantees to help Indigenous Peoples invest in natural-resource projects have long been led by the Indigenous Resource Network and the First Nations Major Projects Coalition (FNMPC).

The push now has taken on a new life as there are fears that Ottawa will exclude oil and natural gas from such a loan program, to focus instead on supporting other projects such as renewable and low-emissions energies.

Heather Exner-Pirot of the Macdonald-Laurier Institute, a special adviser to the Business Council of Canada, points out in a column in Financial Post that there are provincial loan programs in Ontario, Saskatchewan and Alberta that can include oil and gas.

But “there is growing concern that a federally backed loan-guarantee program will be given a mandate that excludes oil and gas.

“No doubt environmentalists would treat exclusion as a win. But for Indigenous communities it would be taking billions of dollars in potential equity opportunities off the table.

“For many nations across the country, the oil and gas sector offers by far the best opportunities to generate revenues to fund things like housing, elder and cultural centres, student support and more — not to mention good jobs.”

Exner-Pirot notes that Indigenous nations have obtained more than $10 billion in equity in major resource projects across Canada.

“The bulk of these projects have been in utility assets, but about 40 per cent by value have been in oil and gas. Loan guarantees for Indigenous nations are a very useful policy instrument that allows them to become part owners of projects on their territories. As Ottawa considers expanding their use, it needs to allow Indigenous communities to decide for themselves what kind of assets they want to own.”

Earlier, Cynthia Hansen, an executive vice-president at Enbridge, said the absence of loan guarantees from Ottawa prevents Indigenous Peoples from acquiring equity in projects that are often operated on their lands.

“It’s not enough to consult with Indigenous groups. Empowering Indigenous nations as equity investors in projects with the private sector is material to the Canadian economy.”

About a year ago, Enbridge agreed with 23 First Nation and Métis communities to sell an 11.57% interest in seven pipelines located in the Athabasca region of northern Alberta, for $1.12 billion.

That deal was possible due to a $250-million equity loan backed by a guarantee from the Alberta Indigenous Opportunities Corp., which offers financing to Indigenous communities seeking commercial partnerships, and a mix of other financing supports.

These “creative” methods to provide financial support aren’t enough, says Hansen; a federal program is needed.

And, like Exner-Pirot, Hansen says Ottawa should allow communities to choose what they want to invest in.

Sharleen Gale, chair of the FNMPC, also says fossil-fuel investments must be part of any federal a loan-guarantee program, since having equity in the oil and gas industry can allow First Nations to thrive in a way that suits their values. “We want to be part of the oil and gas industry.”

The Indigenous Resource Network launched its “Ownership Changes Everything” campaign in 2022, to advocate for Indigenous ownership in resource projects.

The campaign calls on Ottawa to implement a National Indigenous Guaranteed Loan Program, modelled on similar programs in Alberta, Saskatchewan, and Ontario.

“The problems our communities are facing is that there are few mechanisms to access the necessary capital for investing in projects and having equity,” says executive director Robert Merasty.

“There are real, tangible solutions. Having a National Indigenous Guaranteed Loan Program is a step the federal government can take that will help First Nations get the capital needed to become partners and owners of the projects on our own lands.”

In June this year, the FNMPC wrote an open letter to federal Finance Minister Chrystia Freeland, saying: “Advancing major resource projects is essential for both a successful energy transition and growing the economy to benefit all Canadians.  . . .

“Barriers to ownership exist for many Indigenous communities. A national Indigenous loan-guarantee program would be an important way to overcome some of them. The Indian Act remains a major stumbling block, barring First Nations from borrowing against their assets and land.”

The coalition added that Indigenous Peoples need fair opportunity for capital access and project ownership.

“To address Indigenous access to capital, the federal government should, in partnership with Indigenous leaders and other experts, formulate, fund, and operationalize a national Indigenous loan guarantee program.”

Enbridge CEO Greg Ebel joined the campaign, urging Ottawa to support an LNG economy for Canada — and introduce a federal Indigenous loan-guarantee program for equity.

Says Ebel: “If used to displace coal in Asia and eastern Europe, Canadian natural gas would have a tremendous impact on reducing global emissions — one far greater than Canada merely achieving its own 2050 net-zero commitment. . . .

“At the same time, investment in the entire energy sector and many others could be accelerated by the immediate implementation of a federal Indigenous loan-guarantee program to ensure Canada’s Indigenous Peoples have a seat at the table while also having equity that helps them secure a more prosperous future.”

John Stackhouse, senior vice-president in the office of the CEO at the Royal Bank of Canada, says most companies are now looking for shared ownership — but land-ownership rules tied to the Indian Act often complicate a First Nation’s ability to finance an equity share in a project.

“The communities don’t have a balance sheet to borrow against. That’s fundamentally the challenge.”

The Royal Bank sees a need to raise as much as $50 billion of Indigenous equity to advance projects — and Stackhouse says a national guaranteed-loan program would help.

Niilo Edwards, CEO of the FNMPC, says: “The private sector really wants to include Indigenous nations as equity partners. But if there isn’t a viable way to finance that contribution, the private sector doesn’t want to go out there and raise unreasonable expectations that can’t be met.”

Sharleen Gale of the FNMPC, elected chief councillor of the Fort Nelson First Nation in B.C., led a delegation to Ottawa in June to promote creation of a national Indigenous loan-guarantee program.

To date, there has been no clear promise of such from Ottawa.

The finance minister’s office has said only that the government has several programs to help Indigenous communities participate in major projects and “we continue to explore additional federal supports to increase access to capital for Indigenous groups to invest in major resource projects.”

And the finance ministry said the annual federal funding for Indigenous priorities has increased 156 per cent to $29 billion today, from $11 billion in 2015.

Now, is a federal loan-guarantee program on the way? One that does encompass loan guarantees for investment in natural gas and oil? We hope so. . . .

Graphic from First Nations Major Projects Coalition

(Posted here 05 October 2023)

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