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Indigenous equity ownership rising in Canadian energy

projects

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First Nation taking on up to C$1.4 billion in debt to

finance

stake

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Some other LNG projects face Indigenous opposition

By Amanda Stephenson

KITIMAT, Canada, Sept 19 (Reuters) - When Maureen Nyce,

the new chief of the Haisla First Nation, donned a hard hat and

safety vest for an August visit to the site of the Cedar LNG

pipeline, she did so not as a visiting dignitary or cultural

emissary - but as an owner.

The Haisla - who have occupied territory on Canada's Northwest

coast for 9,000 years - own a 50.1% equity stake in the

$4-billion Cedar LNG export project near the town of Kitimat,

British Columbia. Calgary-based Pembina Pipeline ( PBA ) owns

the remainder.

The world's first majority-Indigenous-owned LNG project,

expected to be operational in 2028, could drastically change the

future of Nyce's people and serves as a test case for Canada,

which has just started exporting LNG to Asia and is trying to

reduce export reliance on the United States.

But getting Cedar LNG from the idea stage to reality was

dependent on a number of unique factors, Reuters learned during

a site visit and from Nyce's first media interview since she

became chief in July.

The project benefited from strategic use of existing

infrastructure, near-unanimous community support, and a massive,

first-of-its-kind loan - a combination that could be difficult

to replicate as Canada, the world's fifth-largest natural gas

producer, seeks to strike a balance between Indigenous rights

and economic growth.

In Canada, energy partnerships with Indigenous groups are

normally initiated by industry but Cedar LNG was Indigenous-led

from the beginning.

One crucial component was a 2018 deal that gave the Haisla

access to 400 million cubic feet per day of capacity on the

670-km Coastal GasLink pipeline that brings natural gas to the

larger Shell-led LNG Canada facility.

LNG Canada - which this year shipped Canada's first LNG to Asia

- also sits on Haisla land. To secure Haisla support for the

project, Shell and other LNG Canada proponents started

consultations with the First Nation in 2013.

While some in the community had early concerns, especially

around environmental impacts, many Haisla felt the industry's

growth was inevitable.

"It was viewed by our people as, 'we can either jump on board,

or we can get off and leave it and get left behind,'" Nyce said.

Leadership saw a rare opportunity to invest in the future, in a

community where many live below the poverty line.

The Haisla negotiated direct financial payments from LNG

Canada, but Dave LaVallie, the Nation's business development

officer at the time, urged the council to push for access to

Coastal GasLink shipping capacity.

The Haisla were then able to search for a private-sector

partner to help build their own LNG facility.

Pembina Pipeline ( PBA ) was looking for opportunities after canceling

its Jordan Cove LNG project in Oregon due to opposition from

landowners, environmentalists and Indigenous groups.

The Haisla had guaranteed pipeline access as well as

community endorsement early on, said Stu Taylor, Pembina's

senior vice-president and corporate development officer.

"What boards want, what executive teams want, is that

certainty," Taylor said.

The Haisla initially chose a smaller developer, Taylor said, but

Pembina bid on the project a second time after the Haisla

realized they needed a larger company with more financial heft

behind them. They signed a partnership agreement in 2021,

Pembina's first such equity deal with an Indigenous community.

"We had all the normal concerns," Taylor said. "Can they fund

the project, what capabilities do they have, how are you going

to manage the joint venture, does the community support it?"

Pembina's original vision involved the Haisla owning a

minority stake, but "the Haisla, right from the very start, had

a vision of being the majority owner," he said.

The Cedar LNG board consists of four Haisla directors and

four directors from Pembina.

DIVISIVE ISSUE

Partnering with Indigenous communities, encouraged by Canadian

Prime Minister Mark Carney, can help projects win regulatory

approval.

In Canada, 73% of the 504 major resource and energy projects

under way or proposed run through or are within a 20-km radius

of Indigenous territories.

But in some cases, Indigenous equity ownership has not deterred

opposition and deals can still fall apart.

Pipeline operator TC Energy TRP.TO in February terminated a

highly publicized deal to sell a minority stake in its Canadian

natural gas pipeline system to Indigenous communities for C$1

billion, according to a securities filing.

TC declined to say why and the communities did not respond

to requests for comment.

Approximately 230 km north of the Cedar project, the Ksi

Lisims LNG project, proposed by Houston-based Western LNG and a

consortium of Canadian natural gas producers, faces community

pushback.

The Nisga'a Nation has purchased an equity stake in the

pipeline being built to supply Ksi Lisims and supports the

project. But it is opposed by other Indigenous groups, including

the Gitanyow Hereditary Chiefs, who last year blockaded service

roads to protest the pipeline's construction through their

traditional territory and fear an impact on local salmon

populations.

The federal government approved Ksi Lisims on September 15 but

the Gitanyow say they will continue to fight the project,

possibly through the courts.

Tara Marsden, sustainability director for the Gitanyow

Hereditary Chiefs, worries industry proponents are using

Indigenous partnerships to give their projects the perception of

widespread social license.

"(LNG) is not unanimously supported, and it is a divisive

issue for many people," Marsden said.

There are 165 energy and related infrastructure projects

across Canada partially or wholly owned by Indigenous

communities, and 29% of those equity agreements were announced

within the last two years, according to law firm Fasken.

The Haisla worked closely with Pembina's finance team to

secure funding. Sixty percent of the project will be funded by a

construction term loan with a syndicate of banks, while 40% will

be financed through equity contributions from both partners.

The Haisla ultimately borrowed C$1.4 billion from the First

Nations Finance Authority, a non-profit corporation owned and

controlled by First Nation governments, to fund their share,

Nyce said. It is the largest loan the FNFA has issued to date,

and one of the largest ever issued to a First Nation in Canada.

In a ratification vote last year, nearly 93% of Haisla

members voted in favour of borrowing money for the project.

Nyce declined to put a dollar value on the revenues the Haisla

expect from Cedar LNG. She said it will be at least a decade

until significant revenues flow to the community rather than

paying off debt.

Even so, she and other council members are putting plans in

place - for housing, for education and training programs, for

health and social supports for community members.

"This is our territory. When this project is gone, we'll

still be here," Nyce said.