THE LOCKEAN VIEW

Energy deals reboot ties between Indigenous people and corporate Canada

Story by Special to National Post • Yesterday 

Hydro Quebec power lines running through the province.© Provided by National Post

Last September, 23 First Nations and Métis communities in Alberta, united under the banner of Athabasca Indigenous Investments, spent $1.12 billion to purchase an 11.57 per cent interest in seven oil pipelines operated by Enbridge Inc. While the sheer size of the investment is notable, large investments in energy infrastructure projects by Indigenous communities in Canada are starting to become commonplace.

On Monday morning, Hydro One Networks Inc. held a groundbreaking ceremony with its First Nations partners for the Chatham to Lakeshore Transmission Line project, a 49-kilometre transmission line in Ontario.

While these equity partnerships are about business, they’re more than that. They represent steps toward reconciliation by corporate Canada and forays into self-sufficiency previously denied to Indigenous people. They are also an acknowledgement of where much of the energy that power this country originates.

“It’s important to realize that resources have been extracted from traditional lands for generations and society has benefited from that extraction. Most times, Indigenous communities have been excluded from the benefits that are associated with that resource extraction. I think it’s fitting that Indigenous communities take ownership of the assets in their traditional territories,” said Justin Bourque, president of Athabasca Indigenous Investments (AII) and a member of the Willow Lake Métis Nation, one of AII’s 23 member nations.

“As we move into a time of keen focus on reconciliation with the Indigenous peoples across Canada, this is one lever to provide capacity, to provide substantive resources to the communities to help their development and help in the inclusion of those communities in resource development going forward.”

Becoming business partners with utility and energy companies also ensures Indigenous communities have input into the design and planning of upcoming projects before they even get underway — a critical element of the projects getting approved in the first place.

Hydro-Québec, for example, had wanted to build a transmission line into the United States to sell power to New York City. The planned route for the 57.7-kilometre Hertel–New York interconnection line went through the traditional territory of the Mohawk Council of Kahnawà:ke. The relationship between the Mohawk and Hydro-Québec included unaddressed historical grievances. According to Grand Chief Kahsennenhawe Sky-Deer, the Mohawk Council informed then-mayor Bill de Blasio that the project wouldn’t be going ahead without Mohawk participation.

Currently, preparations for construction are underway in New York. Hydro-Québec’s U.S.-based partner has obtained its necessary U.S. permits, and in Canada, the federal and provincial regulatory review processes are ongoing. The project is scheduled for completion in May 2026, at which time the Mohawk Council will make a final decision about how much equity to purchase in the line, based on the total costs of building. At minimum, the Mohawk will acquire a 10 per cent stake. At the maximum end, it will be 49 per cent.

While most Indigenous communities don’t have millions of dollars to invest, the nature of infrastructure projects makes them attractive investments. They’re large — typically, projects are worth a minimum of $100 million. They’re also long-term, have a value understood by banks and equity funds, and they generate cash-flow, enabling borrowers to pay back loans and still return profits to their communities. They are also relatively safe investments.

“One of the most important things is that if the commercial entity doesn’t stand behind getting the project built, it will never happen,” explained David Dal Bello, managing director and global co-head, power utilities and infrastructure at RBC Capital Markets.

“What they do is, they de-risk the project. They get it up and running, for the most part, and invite the Indigenous communities in once the project is de-risked for them so that it’s easier for them to raise the equity or debt to support their investment the project,” Dal Bello adds.

The utility or commercial partner almost always retains operating control of the infrastructure. Usually, the Indigenous partners are minority shareholders, although there are some instances, such as the 230-kilovolt Waasigan Transmission Line being built in northern Ontario to provide power to mining projects, where the equity is split 50-50.

Legally, the Indigenous communities usually come in as limited partners, said Montreal-based Nadir André, a partner at the law firm Borden Ladner Gervais and a member of the Matimekush-Lac John First Nation. This protects them in some ways, but limits them in others.

“The limited partner will not be part of the decision-making process, which is left to the general partner. They will not be on the board of directors… It is permitted that they [make decisions] through the limits of partnership agreements, but the more the limited partner takes part in the decisions, the more liability they will have to cover regarding the structure of the project itself.”

While formal decision-making power may be limited, that doesn’t preclude co-operation or consultation. At Hydro-Québec, “we involve the community — as we would involve any community — in the design phases of the project with technical tables and environmental tables. We’ll take into consideration all these aspects and requests from the community or concerns from the community in terms of land use. This is one aspect of the collaboration and the partnership which would exist even if we didn’t have the financial partnership,” said Mathieu Boucher, Hydro-Quebec’s director of Indigenous Affairs.

While equity partnerships are becoming more popular, they are still relatively new. Everybody involved, both on the Indigenous side and on the corporate side, are still trying to figure out how to make them work. Hydro One CEO David Lebeter said that learning how to manage the partnerships is a leadership priority.

“The business change management aspect is helping our team understand that we have a partner, being supportive of the team when that’s necessary, and being supportive of the partner when that’s necessary. The entire executive team, myself included, are more involved at this point in time because we’re trying to learn a different way of working, so it takes a bit more effort and we have to lead by example,” Lebeter said.

The utilities and energy companies that are offering equity partnerships in their projects say it is only one small part in their reconciliation efforts. Employment training, hiring Indigenous contractors and investing in Indigenous communities are also part of that process. For example, Kim Brenneis, director of community and Indigenous engagement for Enbridge explained the company has a 22-step Indigenous reconciliation action plan.

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“Reconciliation is not anybody else’s journey. It’s Enbridge’s journey…We believe it’s not only the right thing to do, but it also makes sense. It helps align interests and helps to provide a better relationship with nations that we already have relationships with, and it helps progress reconciliation.”

There are still challenges associated with Indigenous equity partnerships

One of the more basic ones is the lack of availability of suitable projects, said Kent Ferguson, managing director and co-head, global energy at RBC Capital Markets. “Right now, there’s not a lot of new builds in power and utilities…When we start building more renewables, I think you’ll start seeing more activity.”

Another challenge is convincing members of the Indigenous communities themselves these are worthwhile projects with trustworthy commercial partners.That was the case for Grand Chief Sky Deer when presenting the project to her community.

“I had to say ‘we know Hydro-Québec did us wrong in the past, but it’s a new day. We’ve got to try to do things differently. It was a hard sell to my people because of what we’ve been through, but we’ve all got to have hope. And we’ve got to keep extending olive branches and try to build trust and try to build relations.

[Equity partnerships] are uncharted territory,” Deer adds. “We’ve never been in this position where people are coming to us now and saying ‘We’re interested. We want to help your people. We know we want to change the relationship.’”