Varcoe: Ottawa includes energy projects in new $5B Indigenous Loan Guarantee Program

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Less than five years ago, Alberta set up a loan guarantee program that has now seen Indigenous communities invest more than $1.5 billion and buy ownership stakes in major energy developments across the province.

It’s about to be joined by Ottawa.

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In Tuesday’s federal budget, Finance Minister Chrystia Freeland unveiled details of a new Indigenous Loan Guarantee Program, which was first discussed by the Liberal government last year.

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The federal program will provide up to $5 billion in loan guarantee capacity to “unlock access to capital for Indigenous communities, creating economic opportunities and supporting their economic development priorities,” according to the budget.

Oil and natural gas projects and other natural resource developments will be eligible.

It’s something Indigenous leaders and business groups had pressed the Trudeau government to include, as many wondered if Ottawa would exclude fossil fuel developments from the mix.

However, the program will be “sector-agnostic for natural resource and energy projects to prioritize economic reconciliation and self-determination,” the budget states.

“We are committed to ensuring Indigenous Peoples share in Canada’s economic prosperity, including from the energy industry,” said Katherine Cuplinskas, a spokeswoman for Freeland.

The announcement was welcomed by groups across Western Canada, even winning approval from the UCP government in Alberta.

First Nations Major Projects Coalition CEO Niilo Edwards applauded the news, calling Tuesday “a good day.”

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“We’re clearly pleased with the sector-agnostic approach,” Edwards said in an interview from Ottawa.

“It empowers self-determinations for Indigenous nations, to decide what project is right for them.”

The coalition, made up of more than 150 Indigenous communities, has estimated Indigenous equity participation could potentially hit $525 billion in capital investment over the next decade.

Edwards said there’s strong interest by First Nations and Indigenous communities to acquire an ownership stake in a variety of projects, from traditional energy developments to emerging sectors, such as in small modular reactors, hydrogen and critical minerals.

LNG terminals, mining developments and even a stake in the federally owned Trans Mountain pipeline could be on the table in the future.

“We have some $500 million of Indigenous equity that needs to be financed in the next 12 or so months,” Edwards added.

“We have projects that are ready to go to be examined by this program.”

The Alberta government, which largely criticized the budget, gave the feds credit, with Finance Minister Nate Horner pointing out it mirrors Alberta’s program.

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The Alberta Indigenous Opportunities Corp. (AOIC), set up in 2020, has the capacity for loan guarantees totalling $3 billion.

To date, it has extended more than $680 million in guarantees, supporting more than $1.5 billion of investment.

These investments have included equity positions in gas-fired electricity generation projects, midstream energy assets — such as oilsands pipelines — and cogeneration facilities.

AIOC chair Stephen Buffalo said the program can extend across the country with Ottawa’s participation, and could eventually lead to collaboration and syndication deals between the federal and provincial entities.

“Indigenous communities have to find ways to really take advantage of business opportunities,” said Buffalo, who is also CEO of the Indian Resource Council of Canada.

“To be able to create your own revenue through participating in such a program, it’s imperative.”

The federal budget noted Indigenous communities have had fewer options for securing capital or using existing assets as collateral, due to the Indian Act, leading to higher borrowing costs that have created barriers to equity investments.

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Government-backed loan guarantees can bridge that gap, helping communities access third-party capital at a lower cost — backstopped by the government’s credit rating — to become owners in major projects.

Such investments can provide a revenue stream, new economic development opportunities and provide communities with a direct say in decision-making on projects.

Business groups also welcomed the news, with the head of the Canadian Association of Petroleum Producers calling it a “significant advancement.”

”The Alberta Indigenous Opportunities Corp. is a perfect example of what is possible when you get it right,” added Calgary Chamber of Commerce CEO Deborah Yedlin.

“It should be across the country.”

In Alberta, one of AIOC’s largest deals occurred in 2022 when Enbridge sold a nearly 12 per cent stake in seven oilsands pipelines for $1.12 billion to Athabasca Indigenous Investments, which represents almost two dozen First Nations and Metis communities in Alberta.

AIOC provided a $250-million loan guarantee.

Enbridge spokesperson Jesse Semko applauded the new federal initiative, saying a “robust loan guarantee program . . . will advance Canada’s energy future and Indigenous economic reconciliation.”

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AIOC chief executive Chana Martineau said taking the program across Canada will have a monumental effect.

“Different nations and communities have different opportunities,” she said.

“Indigenous economic reconciliation is about supporting Indigenous communities in participating in the current economy — the current economy includes resources.”

The First Nations Major Projects Coalition, established by several B.C. First Nations to assist them in examining ownership of resource developments, says accessing affordable capital was one of the issues that initially led to the group’s creation.

And having a national program in place will fill a financing gap.

“We’ve been at this on behalf of our members for over 10 years,” Edwards added.

“Eventually, you just hope the system does the right thing. And today, it did the right thing.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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