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Tomorrow’s energy projects are budgeted. Will First Nations and industry find common ground?

That's the $650-billion question

By Lyndsie Bourgon

albertaoilmagazine.com

Every so often, Dayle Hyde wakes up to the smell of the oil sands. Hyde grew up in Fort McKay, a small First Nations community nestled in northern Alberta’s boreal forest, and has watched her hometown over time slowly become the center of oil sands development.

Canada’s First Nations communities, like the community where Hyde lives, are more likely than any other in Canada to live in close proximity to the oil and gas operations. Over the next decade, more than 600 major oil and gas projects, cumulatively worth about $650 billion, are planned in regions across Canada. In Western Canada, there isn’t a single proposed oil and gas development project that won’t impact at least one neighboring First Nation community. In fact, most of the proposed projects listed on the federal government’s Major Projects Management Office website would impact more than one.

In November 2013, the Vancouver-based Fraser Institute released a report called Opportunities for First Nation Prosperity Through Oil and Gas Development. The message of the institute’s report is emblematic of a wider attitude among non-aboriginal Canadians, and is true among many companies in the energy industry executives, namely: First Nations communities stand to benefit greatly, both in terms of employment and educational opportunities, from allowing resource development in their communities, if only they’d just co-operate with the developers. “In many cases this type of development is the only thing happening or the only thing that could happen in the area, and it could be a lifeline out of poverty and into prosperity if they are able to work with industry members and get the right skills training,” says Ravina Bains, who wrote the report.

But this might be an over-simplification. A $650-billion opportunity for First Nations is also a $650-billion gamble for the oil and gas industry. The industry has much to lose if cooperation agreements are not reached with aboriginal communities. When calculating the contribution oil and gas companies makes to those communities, the Fraser Institute – and industry – would do well to consider more than employment and education in their analysis. Why? Because, as many experienced energy project operators understand, First Nations factor in more than those two metrics before choosing to participate in – or choosing to oppose – industry activities such as drilling and pipeline construction. Hanging in the balance is $650 billion.

It’s difficult not to be shocked by unemployment rates in Canada’s First Nations communities. While the national unemployment rate is 7.1 per cent, that number jumps up to 23 per cent on reserves. In some communities where oil and gas developments are being proposed, the unemployment rate is between 22 and 42 per cent.

Ideally, this presents a win-win for the oil and gas industry, which is perfectly primed to provide local jobs in a booming industry with fair (and often more than fair) wages. Energy companies are mandated by government to consult with First Nations communities when thier activities would impact traditional territories. “In some places, First Nations communities are already working alongside industry to benefit from oil and gas development,” Bains’ Fraser Institute report says. “For example, in 2010 more than 1,700 aboriginal people were directly employed in oil sands operations, and over the past 12 years aboriginal-owned companies have secured more than $5 billion worth of contracts from oil sands developers in the region.”

In communities like Fort McKay and nearby Fort Chipewyan, the oil and gas industry has led to, essentially, a zero per cent unemployment rate. In Fort McKay, the Fort McKay Group of Companies consists of eight limited partnerships that are controlled by the band and provide contract services to the oil and gas industry – and they are massively successful. Founded in 1986, the conglomerate is one of Canada’s most successful aboriginal enterprises with annual revenues of over $100 million. Ninety-eight per cent of its revenue comes from the oil sands. All job-seeking adults willing and able to work are funneled through the Fort McKay Group’s job placement system. It’s the same way in Fort Chip.

But Mark Selman, a professor in the Aboriginal Business and Leadership EMBA program at Simon Fraser University’s Beedie School of Business, says Bains’ report “suggests that if there are unemployed people who could be trained, and [if] you provide the training, that they will move into jobs and be successful and their communities will do well, as if that’s all lock step,” he says. “History shows that’s not the case.”

If Fort McKay’s success were easily replicable elsewhere, those high unemployment rates in aboriginal communities would be a thing of the past. But it’s difficult to take a single approach to issues like unemployment from one First Nation community to another. In his book The Inconvenient Indian: A Curious Account of Native People in North America, author Thomas King writes of a drum circle he holds with friends: “Anishinaabe, Métis, Coastal Salish, Cree, Cherokee. We have nothing much in common. We’re all aboriginal and we have the drum. That’s about it.”

When it comes to employment, the real issue is not simply about the number of jobs; it’s about an opportunity to develop a career path. In Fort McKay, most of the management roles that First Nations members hold are through contractors to companies like Syncrude Canada Ltd. But even Barrie Robb, CEO of business development for the group, says their employment situation is not cut and dried. “I wish it were that simple,” he says.

“What’s really different in Fort McKay is our willingness to work with industry in an organized way,” Robb says. “McKay has been able to create a number of independent businesses, not only band-owned businesses … it’s a bit unusual.” But all that development still leaves gaping holes in the societal needs of the reserve, like daycare centers, schools, elder care homes. In Fort McKay, Syncrude donated $500,000 towards a new elder care center in November. The company has won multiple Gold Level awards from the Canadian Council of Aboriginal Business for its initiatives.

Still, even in booming Fort McKay, partnerships with industry are not always amicable in everyday life. The band recently decided to discontinue participation in an environmental monitoring program because they saw the process as “frustrating and futile.” Even their positive overall relationship with industry did not preclude them from wanting to keep Moose Lake, a remote and pristine lake about 80 kilometers north of town free from development. Moose Lake is a site of cultural importance for the McKay, where they learn traditional hunting, fishing and trapping skills. There are cabins that dot the shore – one local community member told the Edmonton Journal that the edge of Moose Lake is where they feel most at home. They don’t want a proposed Brion Energy Corp. development anywhere near it, regardless of the potential benefits. The community requested a 13-kilometer buffer zone around the lake – but in April 2013, that request was denied.

“McKay needs to help industry understand why places like Moose Lake are so critically important and need to be preserved in a pristine state and why McKay is able to compromise in other places,” Robb says. “Some of the developers don’t understand that. The argument is that the province gave them permission, so can’t we just get out of the way while they do it?”

On websites and press materials, exploration and production companies often boast about their strong relationships with aboriginals by featuring photos of ceremonies or artifacts. Communities are wary of spin. “The reason [they want] First Nations people on board, to some extent, is because people think that First Nations people have an innate environmental consciousness, and if you have them working on the tar sands then they must be environmentally sound,” says Mount Royal University professor Frances Widdowson, who advocated, to major criticism, aboriginal assimilation at a conference in 2008.

Communities need to be included in the actual business, rather than touted in press releases and on corporate websites like “trinkets,” says Joe Dion, chairman and CEO of Frog Lake Energy Resource Corp. “My win isn’t just jobs and cultural things,” he says. “My win is a piece of the long term revenue stream going directly to the communities.”

As King’s drum circle anecdote suggests, what works in one place does not necessarily work in another. In British Columbia, where an emerging LNG industry may lead to a construction boom in pipelines and export terminals, jobs are promoted as the-local-economic-engine-that-could. The Fraser Institute’s report estimates that the major west coast LNG projects could provide over 5,000 construction and 450 operational jobs each.

Also highlighted in the report is the 2013 deal, described as a success story, between the Haisla First Nation and Apache Corp., along with Chevron Corp., that – the report says – brought a major LNG project in British Columbia to fruition.” Premier Christy Clark says there is a potential opportunity to create up to 100,000 jobs through the deal. Haisla Nation Chief Ellis Ross is organizing an employment summit bringing together First Nations, industry, government and training bodies, to make sure the Haisla are in line for the permanent skilled jobs.

According to Selman, this example of successful relations doesn’t quite work: for one thing, that deal was simply an exchange of money as opposed to a formal business partnership. And for another, it has not yet “come to fruition” – it’s just been approved.

Art Sterritt, executive director of the Coastal First Nations alliance, believes jobs at LNG facilities, the proposed Kitimat Clean crude oil refinery and ports along the coast would endanger current jobs in fishing and tourism. “To say that a refinery is going to employ a whole bunch of people, well in the meantime you risk 30,000 jobs on the coast because you’re planning to try and bring a product in there that with a spill will jeopardize those jobs,” he says. “It’s degrading the opportunity for us, as opposed to enhancing it.” The Haisla recently parted ways from the Coastal First Nations alliance, saying that the CFN has made comments that “directly conflict” with the Haisla point of view.

What really needs to happen, according to Forging Partnerships, Building Relationships, the recent report from Douglas Eyford, the prime minister’s special envoy on West Coast energy issues, is a systemic change in how aboriginal businesses are formed. Right now there is “limited access to capital,” and old programs set in place for aboriginal business are no longer keeping pace. “Loan guarantees would provide aboriginal groups with security that would enable them to borrow at lower than commercial interest rates, thereby making potential investments more feasible and profitable,” Eyford says in the report. “Under this approach, governments would serve as a financial backstop should the borrower be unable to repay the loan.” That approach, if successful, might produce more companies like the Fort McKay group but, as Sterritt says, that won’t necessarily bridge the gap between First Nations and the energy sector, even with a $650-billion incentive.

In Fort McKay, Dayle Hyde says her concerns have moved beyond the economic and educational arguments for new resource projects in the community where she grew up. “It’s not so much about employment anymore. A lot of people want employment beyond the oil sands. We’re trying to build our capacity and infrastructure beyond that.”

The Fort McKay experience may exemplify a critical shortcoming in the Fraser Institute report, perpetuating a misunderstanding that some energy companies carry into their consultations with First Nations. “They treat the words ‘impact’ and ‘benefit’ as if they are synonyms,” says Selman. “The fact is that a pipeline project has an impact on territory and enjoyment of traditional way of life, and on the other side are the benefits. They are separate. Skills training does not compensate for the impact. They treat this as if the benefit is only in terms of training and jobs created, but it has to be more than that.”

“If you consider success, and if you consider the objective of any type of education and life itself, as having a well-paying job, then of course there is a grain of truth in it,” University of Victoria professor Taiaiake Alfred says. “But just like in the wider society, when you have underlying mental, physical and cultural stresses, a job doesn’t resolve those problems.”

For Alfred, it’s important to note that, for many First Nations, it is not the resource extraction itself that is troubling. It’s how it is done: “It’s whether or not those practices are going to destroy the land,” he says. “In this case, the oil sands and the pipelines are clearly too much of a risk in destroying the land for First Nations to want to participate. It’s not oil and gas…it’s the particular projects that are being proposed.”

In Fort McKay, development-related money has led to an in-town e-learning and distance education center, funded by Shell Canada Ltd. Other projects, like the elder care center funded partially by Syncrude, have also helped contribute to the community’s quality of life. “I think building a good relationship brings a myriad of benefits, and some of those when you take them together will help on the education and employment front,” says the McKay Group’s Robb. “But there’s not an easy answer; no silver bullet in addressing issues on either side of the equation.”

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