Suncor Energy Inc. has signed an agreement with the Fort McKay First Nation that the oilsands giant says could lead to its first-ever bitumen extraction project on reserve lands.

The Calgary-based energy company, together with the Fort McKay First Nation, announced Thursday that they have struck a memorandum of understanding on an oilsands lease development opportunity.

Suncor said it is in the process of conducting early-stage technical and commercial feasibility assessments to determine the quality and quantity of mineable bitumen ore in the area, which is located within the Regional Municipality of Wood Buffalo in northern Alberta and on the Fort McKay First Nation's traditional territory. (Bitumen is a variant of oil common in the oilsands.)

"Any resource extraction from this lease would be a first," said Suncor's executive vice-president of oilsands Peter Zebedee in an interview, adding the agreement ensures the First Nation will be in charge of governing oilsands activity on the reserve as well as having the opportunity to financially benefit from it.

“It’s a real example of Fort McKay having a significant say in responsible resource development and how we build these resources ultimately to fruition, but also having a significant share and sharing in the benefits of this resource extraction.”

Suncor has been seeking ways to boost its long-term bitumen supply to replace output from its Base Plant mine, which is expected to be depleted as early as the mid-2030s. Suncor's move to buy French company TotalEnergies' stake in the Fort Hills oilsands mine last year was part of that effort. 

While Zebedee said it's too early to know the exact scale or potential of the bitumen resource at the Fort McKay lease site, he said it's one of a "suite of opportunities" being considered as part of the company's overall bitumen supply plan.

He said the lease site is appealing in part because of its location between Suncor's joint venture Syncrude Aurora site and its Fort Hills mine.

"Given just where it's located geographically, we do see some good synergies with Suncor's existing operations in the region," Zebedee said.

The Fort McKay First Nation has more than 900 band members of Dene and Cree heritage residing on the reserve and abroad. The community is located 50 km north of Fort McMurray along the shores of the Athabasca River.

In a news release, Fort McKay First Nation Chief Raymond Powder said the agreement charts a new path for economic development on Indigenous lands and will help secure the local community's future growth.

"This is the true meaning of reconciliation," Powder said. 

"It puts in our hands the tools we need to bring prosperity and a sustainable future for our people."

First Nations' relationship with Canada's oilsands industry over the years has been complicated. Some First Nations people in northern Alberta oppose oilsands expansion over concerns about potential negative impacts on treaty rights, culture, waterways and the environment.

Others welcome the jobs and economic growth opportunities that the industry brings. 

The Fort McKay First Nation has been supportive of Suncor's commitment to achieving net-zero emissions from its oilsands operations by 2050, as well as the work of the Pathways Alliance oilsands industry group, which has proposed building a major carbon capture transportation and storage network in northern Alberta.


The same project has attracted criticism and concern from some other First Nations in the region.

On Thursday, Alberta Premier Danielle Smith said she was excited to hear about the agreement between Suncor and Fort McKay First Nation.

"I would love to see more projects like that because I have conversations often times with our First Nations partners and one of the things they ask is, 'How can we do more to share revenue?' " Smith told reporters.

"So to see a proposal where a band is going to be in on the ground floor of production, it just warms my heart. I think it's a fantastic proposal."

This report by The Canadian Press was first published March 7, 2024.