Ottawa’s move to help Indigenous peoples fund investments in natural-resource and energy projects is coming, and, as requested by First Nations leaders, it will allow for equity investment in oil, gas, LNG, and related initiatives.
The program was announced in the 2024-5 federal budget this week, with Finance Minister Chrystia Freeland promising that up to $5 billion will be available.
There is no detail yet on when the program will go into effect, how long a period it will cover, what the rules and red tape will be, or exactly how it will be administered.
But at least it will allow for Indigenous investment in oil and gas projects.
There had been fears by Indigenous leaders and groups (including our Alliance) that the program might bar such investment. But In Ottawa’s words it will be “sector agnostic.”
Said Freeland: “Indigenous communities need to be able to share in the benefits of natural resource and energy projects in their territories and on their own terms. Due to the Indian Act and the legacy of colonialism, Indigenous communities have fewer options for securing capital or leveraging existing assets as collateral, leading to increased borrowing rates that create a barrier to equity investment in natural resource and energy projects. . . .
“The Indigenous Loan Guarantee Program will provide access to affordable capital to Indigenous governments and communities. Loans would be provided by financial institutions or other lenders and guaranteed by the Government of Canada. This means that the borrower would benefit from the government’s AAA credit ratings, delivering a lower interest rate than is available to most borrowers.”
Her budget speech in Parliament, and her budget documents, included these points:
- Up to $5 billion in loan guarantees to unlock access to capital for Indigenous communities, creating economic opportunities and supporting their economic development priorities.
- Applicant eligibility would recognize Indigenous governments, and their wholly owned and controlled entities.
- The program would be sector-agnostic for natural resource and energy projects to prioritize economic reconciliation and self-determination.
- The program would support projects across the country, and a range of project types, to ensure that Indigenous communities across the country benefit from the program.
- Natural Resources Canada would be responsible for intake and capacity building, and the Canada Development Investment Corporation (CDEV), a Crown corporation in the Department of Finance Canada portfolio, would create a new subsidiary to provide due diligence on the applications and administer the portfolio of loan guarantees.
- Budget 2024 also proposes to provide $16.5 million over two years, starting in 2024-25, to Natural Resources Canada, including $3.5 million over two years to support capacity funding for Indigenous communities and applicants and delivery of the Indigenous Loan Guarantee Program by CDEV. This investment will provide capacity building supports to assist eligible Indigenous communities in making applications for loans through the program.
The need for capacity funding had been pressed by Sharleen Gale, chair of the First Nations Major Projects Coalition (FNMPC), and others.
Alberta, Saskatchewan and Ontario have long been ahead of Ottawa in providing Indigenous loan guarantees. And British Columbia has promised its own program, offering a potential $1 billion, with $200 million of First Nation equity loans per year for five years. It is not yet known if it will permit investment in oil, gas, and LNG.
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 notes: “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.”
It unknown at this point whether or how Indigenous Peoples will have a role in the governance and administration of the new federal program.
The C.D. Howe Institute has said: “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.”
And there remains the bottom-line question of how far $5 billion will go in practice. For example, several groups of First Nations are interested in equity investment in the federal Trans Mountain oil pipeline, and Ottawa has said it would support this. But at last count the project is worth around $34 billion.
Still, the program will be of interest to such groups as First Nations who have been offered options to take a 10-per-cent interest in the Coastal GasLink pipeline in B.C. It will feed the LNG Canada plant and the Cedar LNG project planned by the Haisla Nation.
As Sharleen Gale says: “Members of the FNMPC know that, especially in our rural and remote communities, major projects are one of the few development opportunities that could bring meaningful change
“First Nations communities know they cannot rely on government programs alone to close the infrastructure and socio-economic gaps; economic development is required, and today’s budget showed the government’s commitment to making this a reality.”
Our First Nations LNG Alliance welcomes the program. And it was also hailed by the Indigenous Resource Network, and by TC Energy and Enbridge, both affiliate members of our Alliance.
More on provincial loan-guarantee programs:
- In Alberta, Saskatchewan, and Ontario: https://ow.ly/4sUM50QHxyF
- In B.C.: See pages 62-63 at https://ow.ly/UXRP50QGV1G
Finance Minister Freeland delivers her budget speech in Parliament
And from the Indigenous Resource Network:
Posted here 17 April 2024
