The Project Reconciliation initiative team (PRI) has been busy. Busy consulting, analyzing, evaluating and diversifying their vision of the project which now includes a branch exploring Indigenous ownership of energy transition projects.
With recent signals from the Federal government that they are ready to discuss the sale of the Trans Mountain Corporation, the PRI team is poised to make their bid.
The appointment of Robert Morin as the PRI chairman in April of last year was key. He took the position over from former chairman, Delbert Wapass. Morin is a treaty member of the Enoch Cree Nation- located on the western boundaries of the city of Edmonton and is the former President & CEO of the River Cree Resort & Casino.
Morin’s ancestors were originally from the Papaschase First Nation whose traditional lands were located in the south & eastern regions of the City of Edmonton.
“For the last few years, I have been working with Chief Calvin Bruneau of the Papaschase First Nation in economic development along with assisting the Chief to get his Nation back to Reserve status,” says Morin. “When the early settlers came to the Edmonton area, they took the reserve lands from the Papaschase to make room for the CN railway. Their land was usurped by a very unscrupulous politician – Frank Oliver- Minister of the Interior and the Superintendent General of Indian Affairs under the government of Sir Wilfrid Laurier,” says Morin.
Frank Oliver, as interior minister, developed legislation to force Indigenous people, like the Papaschase First Nation, off not only their traditional lands but also off lands that they had been given under treaty. The federal government paid the First Nations amounts that were even seen at the time as woefully inadequate compensation. “There is also evidence Oliver benefited financially from the resale of indigenous lands the federal government had acquired,” as reported by the CBC.
Morin says about 85 members from the Papaschase Cree Nation were sent to Enoch of which his family is descended. He notes it is interesting that there are tank farms are on what was originally Papaschase First Nation lands in northeast Edmonton.
So both Trans Mountain pipelines run through the middle of Enoch Cree lands and what was formerly known as the Papaschase Cree First Nation lands. The involvement and investment with PRI seem an obvious choice to Morin. He has a dual interest in making sure the Nations get a recognition that is rightfully deserved, not only the Enoch and Papaschase Cree but also the remaining 127 Nations involved with PRI (129 in total).
Stephen Mason, PRI’s senior managing director is no stranger to creating economic development for Indigenous groups. He was the founder and vision behind the Artumas Group in East Africa, back at the turn of the millennium. It reached an enterprise value of $1 billion (bn) and involved high-level negotiation with the Government of Tanzania to develop policy.
The team went on to prove up a world-class natural gas resource and built, owned, and operated a fully integrated gas power project, including all the transmission and distribution in the southern region of Tanzania, which ultimately electrified that whole southern region of Tanzania and brought power to 3 million (mn) people that didn’t have power previously.
Mason says it was in that journey of building relationships with the people of Tanzania with the Government of Tanzania in the neocolonialist world of Sub Saharan Africa that came to understand where the world was in terms of indigenous peoples. It was also through this journey in East Africa, Mason came to understand where Canada was with their Indigenous Peoples.
“I’ve been on this journey with Project Reconciliation for almost four years now. We are changing the model that has indigenous peoples as material equity partners with corporate Canada in major, national interest infrastructure & energy transition projects.”
There is a consensus that the Canadian consultation “Duty to Consult” model is broken. The framework is changing under UNDRIP principles, adopted by the Government of BC in the fall of 2019 and soon to be adopted by the Federal government under UNDRIP principles, “Rights for Indigenous Peoples” are being transformed to mean, material equity participation in these major infrastructure projects.
Mason says the problems have circled around the process of having complex and costly consultations that reach what is considered to be initial acceptance of being thorough and sufficient but later get discounted and decisions get reversed. After all the consultation parties agree to have completed a consultation, the validity of the consultation gets challenged in court.
This means the parties go back and do another round of consultation which in turn gets challenged in court again. Mason says the challenge has been that this model of Indigenous consultation and the impacted landowners has just been a conversation leading to token benefit for Indigenous Peoples. He says the conversation often contains a promise of jobs while the pipeline gets built. But, once the pipeline project is finished – the jobs go away. He says often companies try to make promises to have First Nations become part of the operating teams but those promises are quite often undelivered.
“Surface lease rentals are a case in point demonstrating the level of tokenism. Early on in this journey, a few years ago I was meeting with the Chief and Council of the Kamloops- Tk’emlúps te Secwepemc. It was brought to my attention, the annual surface rentals income to the Tk’emlúps te Secwepemc from Line 1 was $1,200 for the whole year. The original Trans Mountain pipeline was built 68 years ago but it’s just the essence of what was wrong with the model,” says Mason.
Mason explains that PRI has taken this initiative to where they are now finance-ready to purchase 100% of the pipeline on behalf of 100% ownership by Indigenous Peoples. It is important to note that the Trans Mountain Corporation was sold to the Federal government in 2018 for $4.5 bn.
At the time, the consensus in industry was that it was over-priced by a little over $1 bn. On February 18, Trans Mountain reported, “The total expansion project cost has increased from $12.6 to $21.4 bn.” The wide-spread 2021 BC wild fires, 2021 flooding and Covid 19 along with costly changes to the pipeline route have impacted the total reported cost.
“The progress we have made over the past two years is remarkable when you consider the unforeseen challenges we have faced including the global pandemic, wildfires, and flooding,” said Ian Anderson, Trans Mountain CEO in the press release.
By February 19, the Federal finance minister stated that no more public funds would be spent on TMX- effectively cutting off funding, noting that several “prospective purchasers still have a strong interest in operational infrastructure assets such as the pipeline expansion.”
According to BNN-Bloomberg “The federal government also reiterated that it plans to divest Trans Mountain and that it’s looking for economic participation with Indigenous groups.”
The PRI team references 94 action items in the Truth and Reconciliation report in their approach. PRI chair Robert Morin wants to communicate that First Nations have never really received a fair share of Trans Mountain throughout 68 years of operation.
“Very little of that resource was given back to the First Nations who certainly could have used it. So we view it that we are offering what we’re willing to pay- the fair market price,” says Morin.
Steve Mason says an important part of PRI’s bigger message is that it is finance-ready. Being finance ready for a project-based recourse allows the communities that don’t have the capital to get a place at the table because the purchase of the pipeline will be done based on shippers that have made a 20-year capacity-based commitment in the pipeline. PRI has been working for the better part of three and a half years getting finance ready.
They initially were looking at buying 51% and tabled a formal offer to purchase in July of 2019. The company had a subsequent meeting with Minister Morneau on the clarity around the purchase. As well as the team figured out the free cash flow coming off the pipeline by working with a team of analysts. PRI signed a mandate agreement with one of Canadians schedule-one banks to help it fine-tune its capital plan.
They met with bond desks in Toronto and in New York to get a good understanding on how to structure a series of bond issues. Two turns through rating agencies got PRI an investment grade on the bonds to get pricing and therefore to get to a point of what would be the cost of funding including a sinking fund to retire the bonds. What is left over for the conversation with the indigenous communities is to determine ownership in terms of economic participation, Mason says.
“It works to be above $400 mn a year that’s available for distribution. What we were hearing from the indigenous leaders was that the communities want to be partners in business with corporate Canada but it was access to capital that was the challenge, especially for some communities, ” says Mason
“That was the genesis of the idea to develop an Indigenous Sovereign Wealth Fund (ISWF), where a portion at the discretion of those communities would get reinvested into the ISWF creating generational wealth,” said Mason. “That reinvestment would be the capital base to partner with corporate Canada on projects like high voltage transmission where are impacts indigenous lands, public-private partnerships with municipalities. We built a very comprehensive ISWF investment model.”
PRI has worked to develop a fair & equitable allocation model that gives impacted Indigenous communities their rightful share of the overall Indigenous Ownership.
So Project Reconciliation is not only finance ready but also governance ready according to Mason. The governance structure is based on the family office model where the 129 First Nations will all nominate an individual or will nominate to the unitholder assembly which will then vote on an indigenous Advisory Council which will be the representation and majority representation on the board. So an Indigenous voice is present through the governance structure and through the ISWF.
Maureen McCall is an energy professional who writes on issues affecting the energy industry.