First Nations communities want a piece of the several hundred billion dollars’ worth of infrastructure projects being planned across Canada over the next decade. Builders want to give it to them, but the barriers First Nations face when trying to access financing is holding dealmaking back.
With the fate of both critical infrastructure development and economic reconciliation at stake, the First Nations Major Projects Coalition and the Business Council of Canada have partnered to convene an event Thursday at the Fairmont Royal York Hotel in downtown Toronto they hope will shine light on their proposed solution: a federal loan guarantee program.
Such a program, proponents say, would not only go a long way toward righting historic wrongs perpetrated against the Indigenous peoples of Canada, it would also expand on the success of existing provincial programs while helping to ensure critically needed national infrastructure actually gets built.
Ownership ensures Indigenous communities have a measure of control over every aspect of projects on their land, from conception through design, construction and operation. Beyond the constitutionally required duty to consult, allowing First Nations communities to become equity partners makes it easier for them to say what they want out of any given project and, more importantly, what they don’t want.
“When you are part owner of a project and can sit at the table and say ‘I don’t want this,’ that is a very powerful thing, more so than the government saying they want to engage and consult with us as First Nations people,” said Andrew John, general manager of the Miawpukek First Nation in Southern Newfoundland.
“If you take away that agency, if you take away that equity position that could be open to First Nations, you create infantilized First Nations and the relationship becomes very paternalistic.”
His community is one of 144 members of the First Nations Major Projects Coalition who are all in a position to purchase equity stakes in what the coalition estimates are 470 projects either planned or in progress on Indigenous lands across the country worth a combined $575-billion. The Miawpukek First Nation, for example, has been offered 20 per cent of a liquefied natural gas project being planned near its land for $10-million.
“Now I have the task of raising those funds,” Mr. John said. “The challenge that we have experienced though is competitive access to capital.”
The source of the problem can be traced to 1876 with the passage of the federal Indian Act, which despite various amendments in recent decades, retains many of its original provisions. One of the provisions that has survived to this day bans Indigenous communities from owning the land on their own reserves.
“Specifically the restrictions that the Indian Act has placed on First Nations to use assets on reserves as collateral,” coalition CEO Niilo Edwards said in an interview from Vancouver. “That is not possible for us.”
Valerie Helbronner, a Toronto-based partner with Torys LLP, who co-heads the firm’s Indigenous practice, said that because the Indian Act prevents First Nations from owning their own land, the assets they can use to secure against a loan are extremely limited. That excludes them from accessing competitive interest rates.
“That is the big thing people talk about in terms of access to capital, that when you apply for a loan you’re not able to secure that loan against your land,” Ms. Helbronner said. “More broadly, the Indian Act as a product and tool of colonization, one of its intentions was really to inhibit the ability of Indigenous people to generate wealth.”
That is exactly what occurred as recently as 2012, Mr. Edwards said, when a group of 16 First Nations in Northern British Columbia had successfully negotiated an equity stake in the Pacific Trails pipeline. Despite having a deal in hand, the only financing available to them was an unsecured loan with a prohibitively high interest rate.
“They were told the interest rate on the loan would outstrip the rate of return on the asset, so there was no financial case to do that deal,” Mr. Edwards said.
Trying to amend the Indian Act would very likely be a slow process, Ms. Helbronner said, as the legislation has long been considered “a bit of a lightning rod” while a government loan guarantee program “is a tool you can utilize right now.”
Mr. Edwards said “the tools exist today within the federal system to make a loan guarantee program work, and that would be a great start.”
“A national program that is sector-agnostic would empower Indigenous nations to decide which deals are right for them.”
Provincial loan guarantee programs, such as the Alberta Indigenous Opportunities Corporation, provide a good template for a federal program, Mr. Edwards said.
It was the AIOC that made it possible in 2022 for 23 Indigenous communities in Alberta to collectively raise $1.1-billion to purchase an 11.6-per-cent stake in a network of seven Enbridge Inc. pipelines.
“That only happened with the Alberta loan guarantee program,” Cynthia Hansen, president of Enbridge’s gas transmission and midstream business, said in an interview. “It is critically important for our Indigenous partners to have that access to equity to create that long-term benefit and it is fundamental to that to have opportunities for loan guarantees.”
“Governments have access to a lower cost of borrowing and that facilitates the direct investment that will make a substantial difference in overall Indigenous reconciliation,” Ms. Hansen said.
For Mr. John in Newfoundland, speed of implementation is a key factor.
“We have to be able to move at the speed of business and provide the funds for these projects to get off the ground,” he said. “Otherwise we are just giving lip service to the idea of economic reconciliation.”
Ottawa also needs to understand that “when we are talking about loan guarantees, we are talking about contingent liabilities,” Mr. Edwards said. “We are not talking about cash out the door.”
Katherine Cuplinskas, spokesperson for federal Finance Minister Chrystia Freeland, declined to specify whether Ottawa was considering launching a new loan guarantee program. In an e-mailed statement, she said the federal government offers other options, including through the First Nations Finance Authority and the Canada Infrastructure Bank.
Even a temporary federal program could prove very effective, Mr. Edwards said. Once Indigenous communities are able to generate income from their initial round of equity stakes, he said, they will be better positioned to self-finance any future deals that may arise.
Trevor Gardner, co-head of Canadian investment banking at RBC Capital Markets who advised the 23 Indigenous communities in their 2022 deal with Enbridge, said that is a reasonable expectation.
“You see that again and again in finance,” Mr. Gardner said. “When something works, it is nice to either do the same thing or slightly improve it and the momentum can be really powerful.”
Mr. Edwards and Mr. John both stressed the need for such a federal program to avoid focusing on certain sectors such as renewable power generation or clean energy.
“Depending on where you live in this country, a First Nation might have 101 opportunities coming at them every month, but there are others that might have one opportunity come to them in a lifetime,” Mr. John said.
“For us, we are geographically isolated, we are two hours away from the nearest Tim Hortons, so opportunities like this don’t come along for us every day so we have to be ready to move fast and seize it.”