The federal budget for 2024-5, due to be presented to Parliament on April 16, promises to include a loan-guarantee program to enable Indigenous People to invest in resource projects on their territories.
Such a program should be welcome — but how welcome depends on Ottawa’s rules and red tape surrounding it.
That a program is needed is clear. Indigenous Peoples are increasingly becoming partners in resource projects, but the Indian Act now bars Nations from using their land as collateral for loans. This means that Indigenous communities are forced to look for commercial equity loans — at higher interest rates.
B.C., Alberta, Saskatchewan and Ontario have long beaten Ottawa to provide Indigenous loan guarantees.
Alberta’s program, started in 2020 through the Alberta Indigenous Opportunities Corporation, has a loan-guarantee capacity of $3 billion. It offers Alberta-based Indigenous groups, as well as out-of-province Indigenous partners, funding for projects with a minimum value of $20 million. To date, it has backed Indigenous investments worth over $680 million, for 42 Indigenous groups.
Ontario’s $1-billion Aboriginal Loan Guarantee Program was launched in 2009 to support Indigenous participation in Ontario electricity infrastructure projects, including wind, solar and hydroelectric generation projects, and transmission projects.
One group of Indigenous leaders points out: “As demonstrated by the programs in Ontario and Alberta, loan guarantees reduce the cost of borrowing for First Nations and therefore help to make equity investment more accessible and affordable.
“So far, the two provincial programs have unlocked $1.5 billion in equity investments and created long-term revenue streams for more than 50 First Nations. Looking to these programs as models for the federal program would be wise.”
- One key question: Will the program allow for investment in oil and gas ventures?
We’ve seen suggestions that it will not, as part of Ottawa’s efforts to reduce oil and gas emissions, and to bring in regulations to cap such emissions.
(We oppose such a cap, agreeing with industry that it could limit production, and agreeing with Robert Merasty, former executive director of the Indigenous Resource Network, who argues: “This emissions cap would be very harmful to Indigenous communities that have successfully pursued ownership in oil and gas projects, and to the thousands of workers and businesses engaged in the sector.”)
The emissions cap also ignores Canada’s biggest opportunity to address climate change, which is helping other, much larger economies get off high emission fuels such as coal. The cap would be bad for the environment, bad for jobs and bad for Indigenous communities pursuing economic prosperity.
- Will the program allow for Indigenous investment beyond “natural resources”?
How about investment in power transmission lines, energy and other infrastructure and more?
Alberta, for example, provides funding that can be used by Indigenous Groups for investments in sectors such as natural resources, agriculture, telecommunications, transportation and related infrastructure.
- Another question: What role will the feds allow Indigenous Peoples to play in the governance of the program?
The C.D. Howe Institute, for one, says: “At a minimum, Indigenous leaders should be fully engaged in setting the strategic priorities of the guarantee program and in the selection of projects and related private sector financing partners. If this program is to succeed, it will thus be critical to strike the right balance between federal and Indigenous interests in its governance.”
- Will the program cover capacity support for Indigenous groups?
Sharleen Gale of the First Nations Major Projects Coalition, and others, say First Nations will need capacity support “for conducting due diligence or seeking advice around corporate structuring—standard practices for any commercial transaction.”
Over to Ottawa, then, to answer the questions — and preferably before April 16.
We understand the budget legislation may also include the government’s planned improvements to the federal Impact Assessment Act, in response to the Supreme Court of Canada’s 2023 finding that the law was “largely unconstitutional.”
This policy is as important to the Indigenous economy as the rest of the economy – nations will be assessing these changes to ensure they support their aspirations for responsible development.
(Posted here 21 March 2024)
