Let’s not sign the death warrant for Canadian energy projects

Montreal Economic Institute - pumpjack-The-Canadian-Business-Executive
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For several years now, the plight of indigenous peoples has been becoming more and more prominent in the public debate. The far lower standard of living on many indigenous reserves and the lack of access to clean drinking water in certain communities is altogether shocking. It is therefore natural to ask ourselves what can be done to improve the situation and move toward true reconciliation.

Yet indigenous communities in Canada do not all find themselves in identical situations; rather, there is great diversity in their circumstances. Even in Quebec, there is a world of difference between, say, a James Bay Cree community, responsible for the administration of its own health care system, and an Inuit community.

This is even truer in Western Canada, where many communities have benefited from an economic boom thanks to the development of oil resources. The average salary of First Nations workers in oil and gas extraction was nearly $150,000 in 2016, compared to an average of just over $50,000 for First Nations workers in general. This is not to mention the different benefits that can stem from agreements between band councils and the company that develops the resource.

In short, Canadian politicians wanting to improve the lives of indigenous peoples must face the fact that one-size-fits-all solutions will not do, and realize that the challenges are complex indeed.

UNDRIP: A recipe for dysfunctional governance

In search of solutions, Prime Minister Justin Trudeau has committed himself to applying the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). This 46-article document adopted by the UN in 2007 was long considered in Canada as the enunciation of principles to which we could try to aspire. As in New Zealand, Australia, and the United States, all democratic countries like ours with colonial pasts and indigenous populations, the Declaration was essentially treated as a symbolic document in Canada.

Indeed, when it endorsed UNDRIP in 2010, the Government of Canada stated that it was “an aspirational document which speaks to the individual and collective rights of Indigenous peoples, taking into account their specific cultural, social and economic circumstances.” The government specified it was “a non-legally binding document that does not reflect customary international law nor change Canadian laws,” but that it reiterates “our commitment to continue working in partnership with Aboriginal peoples in creating a better Canada.”

Without questioning the legitimate aspirations of indigenous peoples and the difficulties they face, we must nonetheless consider the real impacts that applying this Declaration to Canadian law would have on the governance of the country. These effects are not well understood, and a wider appreciation of the different clauses of the Declaration would undoubtedly alarm many Canadians.

Indeed, the right to self-determination as defined in the Declaration would very likely have the effect of granting each and every indigenous community a veto right over bills and decisions that affect them. Such a right of veto would represent much more than just sand in the gears of our mode of governance; it could make our political system completely dysfunctional.

The reconciliation of the non-indigenous majority with indigenous peoples requires a better understanding of the latter’s reality. However, obtaining the power of life or death over many governmental decisions would not necessarily improve their lot, and it would risk creating irreparable tensions between these peoples and the majority of Canadians.

Energy projects are already imperiled

From a strictly economic point of view, the reality is that it is already very difficult to obtain approval to build large energy projects in Canada. The obligations in terms of consultations with indigenous peoples, which have been evolving constantly for several years, represent a significant barrier even now. If this barrier were transformed into an insurmountable obstacle, we would very likely see significant capital flight. After all, companies like TC Energy and Encana Corporation have already decided to pack their bags in recent years and head for the more welcoming shores of the United States, with its less cumbersome and convoluted regulatory framework.

This is on top of the fact that foreign investors are already reluctant to invest in resource development projects in Canada, frightened off by the long and arduous process they would have to endure. Adding to this a right of veto granted to every indigenous community would sign the death warrant for the development of some of our industries that are the most profitable, at least during normal times.

The sad spectacle of the Coastal GasLink project, one of the largest private sector investments in Canadian history, should serve as a severe warning about the granting of a right of veto stemming from the practical application of UNDRIP. The $6.6-billion pipeline is to carry natural gas along a 670-kilometre route from the gas fields of northeastern British Columbia to a $40-billion LNG terminal being built in Kitimat. But in early 2020, a minority of activists—including notably the Wet’suwet’en hereditary chiefs—succeeded in temporarily blocking the path of this project that was favoured by a majority of the indigenous communities directly affected.

The Coastal GasLink project is now back on track, with construction ramping up across northern BC. According to the company, by September, some 2,500 people will be putting pipe in the ground. But if UNDRIP had been the law of the land in Canada? Despite the company having signed agreements with all 20 elected First Nations councils along the route, the Wet’suwet’en hereditary chiefs might have held out even longer, disrupting the project (not to mention rail service across Canada) indefinitely.

An even sadder example is the decision by Teck Resources to abandon its Frontier oilsands mine project in northern Alberta this February. This episode shows once again, as if further proof were needed, that Canada’s regulatory, legal, and political environment already entails unreasonable delays and uncertainty that chase investors away. After spending a decade, and $1.13 billion, satisfying all regulatory and legal requirements, and despite the fact that the project had received the approval of the 14 First Nations in the region, the company was still waiting on the federal government’s blessing when it chose to throw in the towel.

The Frontier project would have brought substantial benefits to the population. Valued at $20 billion, it would have created 7,000 construction jobs and 2,500 operating jobs, and brought in more than $70 billion in government revenue over a 40-year period. Yet Teck Resources, a 100-year-old Canadian company that says they are ‘strong supporters’ of carbon pricing and of policies aimed at limiting greenhouse gas emissions, and whose production would replace more polluting sources of oil, decided to abandon the project. They cited the lack of agreement between the different governments of Canada on how to reconcile environmental policies with the responsible development of the country’s energy resources.

Natural resource development benefits First Nations

The media often convey the mistaken impression that First Nations are uniformly opposed to energy and natural resource development projects, yet this is far from the case. Indeed, many indigenous communities reap substantial benefits from such resource development projects, which is why so many band councils support them. In 2017, natural gas was produced on no less than 51 reserves across Canada belonging to 39 First Nations, while oil was extracted from 35 reserves belonging to 25 First Nations. And in fact, over 119,000 oil and gas workers self-identify as indigenous according to the Canadian Energy Network. 

Most oil and gas resources exploited on First Nations lands come under Indian Oil and Gas Canada, which manages the agreements signed by 57 First Nations representing 101 reserves. The royalties and land fees collected by this organization in connection with crude oil and natural gas extraction have totalled nearly $2 billion over the past decade. These funds are ultimately redistributed to the communities, which use them to develop and maintain their infrastructure or to support social programs.

An MEI Research Paper entitled The First Entrepreneurs – Natural Resource Development and First Nations includes excerpts of interviews conducted with aboriginal community leaders like Ellis Ross, MLA in British Columbia and Chief Councillor of the Haisla First Nation from 2011 to 2017. He speaks with great passion of the development his community has experienced thanks to its improved economic condition following natural gas development: “The community that we are in now is full of optimism and hope. It is not about what we can’t do, it’s about what we can do. It is a totally different community from the one I grew up in,” he declared in an interview for that Research Paper.

Wanting to do what we can to address the plight of Canada’s indigenous peoples and further the cause of reconciliation are laudable goals. By essentially giving a handful of anti-development protesters a veto right, though, the federal government could do real harm not only to the Canadian economy as a whole, but also to the many indigenous Canadians who depend on the development of natural resources in order to make ends meet and improve their lives.

Michel Kelly Gagnon is the President & CEO of Montreal Economic Institute, www.iedm.org

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