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First Nations playing greater role in Canadian infrastructure development

Peter Caulfield
First Nations playing greater role in Canadian infrastructure development

Engagement with Canadian First Nations has been a long and winding road that takes time to navigate and the different ways in which that engagement manifests itself have been changing.

To take one example, the Canadian government has a duty to consult with First Nations groups and communities.

In legal-speak, consultation with First Nations is required if existing or asserted Aboriginal rights might be impacted by a government decision, in the event that, for example, a permit for a construction project is issued.

Even though the Crown is ultimately responsible for undertaking “adequate consultation and accommodation,” it is often a good idea for project proponents to get ahead of the game by engaging and consulting with those First Nations who could be affected by a project.

Although Impact Benefit Agreements (IBA) are separate from consultation, they can be an effective way to satisfy the requirement for accommodation.

An IBA is an agreement whereby a project proponent provides benefits, in the form of employment and/or supply contracts for goods and services used on the project, to a First Nation in exchange for its support of the project.

More recently, First Nations’ participation in projects has been evolving to taking part in infrastructure projects both on and off their lands.

“It’s the trend,” says Sharon Singh, a partner in Vancouver law firm Bennett Jones who is very familiar with both First Nations and infrastructure projects.

There are a number of reasons for the growing move to Indigenous infrastructure ownership, says Singh.

Some examples are the growth of environmental, social and governance (ESG) considerations for non-Indigenous investors, banks and industry; better First Nations’ access to credit; stronger commitment to Indigenous self-determination and self-governance; and greater public awareness and acceptance of First Nations’ ambitions.

“The growth of Indigenous ownership of infrastructure is significant for a number of reasons,” says Singh.

For one thing, it’s a chance for Canada to advance economic reconciliation with First Nations. In addition, it shows there are mutually beneficial opportunities in large projects for both First Nations and industry.

“It highlights what investors look at to help de-risk their investment, therefore attracting capital and potentially competitiveness,” said Singh.   

Singh says there is more infrastructure in Canada’s future, and more Indigenous activity in building it.

“We’ll need to build infrastructure once the pandemic is over, and First Nations will be part of some infrastructure construction,” she said. “Recent Canadian legislation has increased opportunities for Indigenous participation in infrastructure projects.”

Singh has some advice for infrastructure project proponents on working with First Nations.

“Understand that equity ownership is different than impact benefit agreements with neighbouring communities,” she said.  “Equity ownership discussions may arise in these engagements with neighbouring Indigenous communities or it could be ownership by Indigenous peoples in projects outside their territories. Engage early and understand the landscape and the aspirations.”

There are many successful infrastructure projects in Canada in which First Nations have played an important part.

For example, seven Alberta Indigenous communities own a combined 40 percent equity stake in Alberta PowerLine (APL) and its Fort McMurray West 500-kV transmission project.

Financed through the largest P3 bond transaction in Canadian history, the 508-km transmission line is the longest of its kind in Canada and was energized in March 2019.

Canadian Utilities, one of the partners in the project, offered Indigenous communities along the transmission line route the opportunity to purchase up to a 40 percent equity interest in APL out of CU’s ownership stake as part of the sale.

(Bennett Jones acted for Canadian Utilities on the sale of APL)

Singh says Bennett Jones also gave project structure and financing assistance that facilitated Indigenous equity ownership in the Cascade Power Project.

The $1.5 billion project is a 900-megawatt combined cycle power generation facility under construction near Edson, Alberta.

The Cascade ownership deal was is structured through what Bennett Jones calls an innovative and precedent-setting partnership with six Alberta First Nations.

It is the first transaction financially supported through the participation of the Alberta Indigenous Opportunities Corporation (AIOC).

(With up to $1 billion in loan guarantees, AIOC helps to reduce the cost of capital for Indigenous groups and make it easier to raise capital to invest in natural resource projects.)

The AIOC has provided a loan guarantee to the consortium of Alberta First Nations to enable their participation in the project.

Cascade is intended to help lead Alberta’s transition to a lower carbon-intensive power grid by supporting the province’s move away from coal-fired power.

Six hundred jobs will be created during peak construction and commercial operations are expected to begin in 2023.

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